American Realty Investors, Inc. Reports First Quarter 2019 Results

DALLAS–(BUSINESS WIRE)–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, 2019.

In November 2018, the Company created a new subsidiary Victory Abode
Apartments, LLC (“VAA”) and contributed 52 multi-family projects that it
owned and operated to VAA. The Company subsequently sold a 50% interest
to a third party and recorded a $154 million gain. Beginning November
19, 2018, the Company began reflecting its ownership of VAA on the
Balance Sheet as an investment and its share of the Revenues, Operating
Expenses, Depreciation, Amortization and Interest as “Earning from VAA”.
The Statement of Operations for the three months ended March 31, 2018
and the information thereon reflect the operations for the properties
contributed to VAA on a consolidated basis.

The Company believes that the completion of the joint venture creating
Victory Abode Apartments has positioned the company with a dynamic
platform to continue its expansion in the multifamily sector. The
ongoing plan is to continue to develop and acquire apartments in the
geographic markets where demand exceeds supply.

For the three months ended March 31, 2019, we reported a net loss
applicable to common shares of $6.1 million or ($0.38) per diluted loss
per share compared to a net loss applicable to common shares of $0.9
million or ($0.06) per diluted loss per share for the same period ended
2018.

Revenues

Rental and other property revenues were $11.9 million for the three
months ended March 31, 2019, compared to $31.1 million for the same
period in 2018. The $19.2 million decrease is primarily due to a
decrease in the amount of multifamily residential apartment buildings
currently in our portfolio of nine as compared to 53 multifamily
residential apartment buildings for the same period a year ago as a
result of the deconsolidation of 49 residential apartment properties
that were sold into the VAA Joint Venture during the fourth quarter of
2018. As the assets are now treated as unconsolidated investments, our
share of rental revenues is part of income from unconsolidated
investments in the current period and are no longer treated as rental
income.

Expense

Property operating expenses decreased by $8.4 million to $6.0 million
for the three months ended March 31, 2019 as compared to $14.4 million
for the same period in 2018. The decrease in property operating expenses
is primarily due to the deconsolidation of 49 residential apartment
properties that were sold into the VAA Joint Venture during the fourth
quarter of 2018 which resulted in a decrease in salary and related
payroll expenses of $1.7 million, real estate taxes of approximately
$3.0 million and general property operating and maintenance expenses of
$3.7 million.

Depreciation and amortization decreased by $3.3 million to $3.1
million during the three months ended March 31, 2019 as compared to $6.4
million for the three months ended March 31, 2018. This decrease is
primarily due to the deconsolidation of the residential apartments in
connection with our previous sale and contribution of our interests to
the VAA Joint Venture.

General and administrative expense was $2.6 million for the three months
ended March 31, 2019, compared to $2.3 million for the same period in
2018. The increase of $0.3 million in general and administrative
expenses is the result of increases in advisory and management fees of
approximately $0.4 million and professional and finance fees of $0.3
million offset by a decrease in accounting, tax and other general
administrative fees of $0.6 million.

Other income (expense)

Interest income was $6.2 million for the three months ended March 31,
2019, compared to $5.1 million for the same period in 2018. The increase
of $1.1 million was due to an increase of $1.3 million in interest on
receivable owed from our Advisors, offset by a decrease of $0.8 in
interest on notes receivable from other related parties.

Other income was $3.7 million for the three months ended March 31, 2019,
compared to $1.9 million for the same period in 2018. The increase is
primarily the result of a $3.6 million gain recognized for deferred
income associated with the sale of land during the quarter just ended to
third parties.

Mortgage and loan interest expense was $9.9 million for the three months
ended March 31, 2019 as compared to $15.7 million for the same period
in 2018. The decrease of $5.8 million is due to the deconsolidation of
residential apartment properties into the VAA Joint Venture which were
encumbered by mortgage debt.

Foreign currency transaction was a loss of $5.8 million for the three
months ended March 31, 2019 as compared to a gain of $1.8 million for
the same period in 2018. During the first quarter just ended, we paid
$10.4 million in principal and $5.8 million in interests payments to our
bonds denominated in Israel Shekels.

Loss from unconsolidated investments was $1.0 million for the three
months ended March 31, 2019 as compared to earnings of $320 thousand for
the three months ended March 31, 2018. The loss from unconsolidated
investments during the first quarter just ended was driven primarily
from our share in the losses reported by the VAA Joint Venture.

Gain on land sales was $2.2 for the three months ended March 31, 2019,
compared to $1.3 million for the same period in 2018. In the current
period, we sold approximately 22.3 acres of land for a sales price of
$8.7 million, which resulted in a gain of $2.2 million. For the same
period in 2018, we sold 112.2 acres of land for a sales price of $7.2
million and recognized a gain of $1.3 million.

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, shopping centers, and
developed and undeveloped land. The Company invests in real estate
through direct ownership, leases and partnerships and invests in
mortgage loans on real estate. The Company also holds mortgage
receivables. 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
March 31,
  2019       2018  
 
Revenues:
Rental and other property revenues (including $113 and $208 for the
three months ended 2019 and 2018, respectively, from related parties)
$ 11,929 $ 31,083
 
Expenses:
Property operating expenses (including $257 and $227 for the three
months ended 2019 and 2018, respectively, from related parties)
5,997 14,424
Depreciation and amortization 3,109 6,391
General and administrative (including $1,597 and $1,140 for the
three months ended 2019 and 2018, respectively, from related parties)
2,605 2,341
Net income fee to related party 100 53
Advisory fee to related party   1,853     2,956  
Total operating expenses   13,664     26,165  
Net operating (loss) income (1,735 ) 4,918
Other income (expenses):
Interest income (including $5,881 and $4,426 for the three months
ended 2019 and 2018, respectively, from related parties)
6,153 5,109
Other income 3,667 1,901
Mortgage and loan interest (including $2,307 and $1,799 for the
three months ended 2019 and 2018, respectively, from related parties)
(9,968 ) (15,724 )
Foreign currency transaction (loss) gain (5,818 ) 1,756
Equity loss from VAA (1,055 )
Earnings from unconsolidated subsidiaries and investees   58     320  
Total other expenses   (6,963 )   (6,638 )
Loss before gain on land sales, non-controlling interest, and taxes (8,698 ) (1,720 )
Gain on land sales   2,216     1,335  
Net loss from continuing operations before taxes   (6,482 )   (385 )
Net loss from continuing operations (6,482 ) (385 )
Net loss (6,482 ) (385 )
Net loss (income) attributable to non-controlling interest   335     (275 )
Net loss attributable to American Realty Investors, Inc. (6,147 ) (660 )
Preferred dividend requirement       (225 )
Net loss applicable to common shares $ (6,147 ) $ (885 )
Earnings per share – basic
Net loss from continuing operations $ (0.38 ) $ (0.06 )
 
Earnings per share – diluted
Net loss from continuing operations $ (0.38 ) $ (0.06 )
 
Weighted average common shares used in computing earnings per share 15,997,076 15,938,077
Weighted average common shares used in computing diluted earnings
per share
15,997,076 15,938,077
 
Amounts attributable to American Realty Investors, Inc.
Net loss from continuing operations $ (6,147 ) $ (660 )
Net loss applicable to American Realty Investors, Inc. $ (6,147 ) $ (660 )
 
 
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
 
    March 31,     December 31,
  2019     2018  
(unaudited) (audited)
(dollars in thousands, except share and par value amounts)
Assets
Real estate, at cost $ 449,007 $ 455,993
Real estate subject to sales contracts at cost 3,488 3,149
Real estate held for sale at cost, net of depreciation 14,737
Less accumulated depreciation   (80,755 )   (78,099 )
Total real estate 386,477 381,043
 
Notes and interest receivable (including $102,031 in 2019 and
$105,803 in 2018 from related parties)
138,731 140,327
Less allowance for estimated losses (including $14,269 in 2019 and
2018 from related parties)
  (14,269 )   (14,269 )
Total notes and interest receivable 124,462 126,058
 
Cash and cash equivalents 28,163 36,428
Restricted cash 52,964 70,187
Investment in VAA 67,229 68,399
Investment in other unconsolidated investees 7,660 7,602
Receivable from related party 78,348 70,377
Other assets   69,510     66,055  
Total assets $ 814,813   $ 826,149  
 
Liabilities and Shareholders’ Equity
Liabilities:
Notes and interest payable $ 293,473 $ 286,968
Bond and interest payable 151,465 158,574
Deferred revenue (including $30,359 in 2019 and $33,904 in 2018 to
related parties)
30,359 33,904
Accounts payable and other liabilities (including $10,212 in 2019
and $9,984 in 2018 to related parties)
  24,938     25,576  
Total liabilities 500,235 505,022
 
Shareholders’ equity:
Preferred stock, Series A: $2.00 par value, authorized 15,000,000
shares, issued 1,800,614 and outstanding 614 in 2019 and 2018
(liquidation preference $10 per share), including 1,800,000 shares
held by ARL and its subsidiaries in 2019 and 2018.
5 5

Common stock, $0.01 par value, 100,000,000 shares authorized;
16,412,861 shares issued and 15,997,076 outstanding as of 2019 and
2018, including 140,000 shares held by TCI (consolidated) in 2019
and 2018.

164 164
Treasury stock at cost; 415,785 shares in 2019 and 2018, and 140,000
shares held by TCI (consolidated) as of 2019 and 2018.
(6,395 ) (6,395 )
Paid-in capital 84,818 84,885
Retained earnings   173,519     179,666  
Total American Realty Investors, Inc. shareholders’ equity 252,111 258,325
Non-controlling interest   62,467     62,802  
Total shareholders’ equity   314,578     321,127  
Total liabilities and shareholders’ equity $ 814,813   $ 826,149  
 

Contacts

American Realty Investors, Inc.
Investor Relations
Gene
Bertcher (800) 400-6407

investor.relations@americanrealtyinvest.com