American Realty Investors, Inc. Reports Third Quarter 2010 Results

DALLAS--([ BUSINESS WIRE ])--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, 2010. ARL announced today that the Company reported net loss applicable to common shares of $36.5 million or $3.17 per diluted earnings per share, as compared to a net loss applicable to common shares of $46.3 million or $4.02 per diluted earnings per share for the same period ended 2009.

Rental and other property revenues were $122.7 million for the nine months ended September 30, 2010. This represents a decrease of $2.9 million, as compared to the prior period revenues of $125.6 million. This change, by segment, is a decrease in the commercial portfolio of $4.8 million and a decrease in the hotel portfolio of $2.3 million, offset by an increase in the apartment portfolio of $4.0 million and an increase in the land and other portfolio of $0.2 million. Within the apartment portfolio, the addition of newly constructed apartment complexes has increased our rental revenues $2.7 million, with the same properties increasing by $1.3 million. Within the commercial and hotel portfolio, the same property portfolio decreased due to an increase in vacancy, which we attribute to the current state of the economy.

Property operating expenses were $76.1 million for the nine months ended September 30, 2010. This represents an increase of $2.7 million, as compared to the prior period operating expenses of $73.4 million. This change, by segment, is an increase in our apartment portfolio of $0.8 million and an increase in our land portfolio of $3.2 million, offset by a decrease in our commercial properties of $0.2 million and a decrease in our hotels of $1.1 million. Within the apartment portfolio, the same apartment properties decreased $0.2 million due to a decrease in overall costs and additional repairs and maintenance. The developed apartments increased expenses by $1.0 million. The land portfolio increased due to a prior year real estate tax accrual adjustments that reduced expenses significantly, in comparison to the current year.

Depreciation expense was $22.5 million for the nine months ended September 30, 2010. This represents an increase of $2.3 million, as compared to the prior period depreciation expense of $20.2 million. This change, by segment, is an increase in our apartment portfolio of $1.5 million and an increase in our land and other segments of $1.0 million. Within the apartment portfolio, $1.3 million was attributable to the developed properties and $0.2 million from the same properties. The increase within the land and other portfolios was due to a prior year adjustment recorded in 2009.

General and administrative expenses were $9.7 million for the nine months ended September 30, 2010. This represents a decrease of $2.2 million, as compared to the prior period general and administrative expenses of $9.7 million. This change is due to a reduction in administrative expenses and cost reimbursements to our advisor, in addition to reductions in professional services.

Other income was $2.5 million for the nine months ended September 30, 2010. This represents a decrease of $1.6 million, as compared to the prior period other income of $4.1 million. The majority of the decrease was due to $2.8 million recorded, in the prior period, as a gain on the disposition of our investment in the Korean REIT, offset by a fee for services rendered in connection with a sale of mineral rights, owned by a third party, in Poland.

Provision on impairment of notes receivable, investments in real estate partnerships, and real estate assets decreased by $30.6 million as compared to the prior period. There were no impairment reserves taken in the current period. Impairment in the prior period was recorded as an additional loss of $1.8 million in the commercial portfolio, $19.1 million in land we currently hold and $9.7 million in land that was sold for a loss in subsequent periods.

Loss on land sales was $4.2 million for the nine months ended September 30, 2010. This represents a decrease of $15.8 million as compared to the prior period gain of $11.6 million.

Included in discontinued operations are a total of 12 and 21 properties as of 2010 and 2009, 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 Companya�s website at [ www.amrealtytrust.com ].



AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
		2010			2009			2010			2009
	(dollars in thousands, except share and per share amounts)
Revenues:
Rental and other property revenues	$	39,775		$	41,495		$	122,719		$	125,565

Expenses:
Property operating expenses		24,949			25,383			76,058			73,380
Depreciation and amortization		7,630			6,074			22,459			20,167
General and administrative		2,193			3,959			7,490			9,746
Provision on impairment of notes receivable and real estate assets		-			-			-			30,639
Advisory fee to affiliate		3,972			4,021			12,017			11,706
Total operating expenses		38,744			39,437			118,024			145,638
Operating income (loss)		1,031			2,058			4,695			(20,073	)

Other income (expense):
Interest income		997			1,334			3,825			4,279
Other income		641			294			2,529			4,146
Mortgage and loan interest		(19,294	)		(20,557	)		(60,840	)		(60,684	)
Earnings from unconsolidated subsidiaries and investees		(3	)		410			(96	)		212
Gain on foreign currency translation		(11	)		464			222			542
Litigation settlement		-			(1,438	)		-			(1,120	)
Total other expenses		(17,670	)		(19,493	)		(54,360	)		(52,625	)
Loss before gain on land sales, non-controlling interest, and taxes		(16,639	)		(17,435	)		(49,665	)		(72,698	)
Gain (loss) on land sales		(72	)		3,397			(4,187	)		11,605
Loss from continuing operations before tax		(16,711	)		(14,038	)		(53,852	)		(61,093	)
Income tax benefit		1,945			1,027			4,584			2,827
Net loss from continuing operations		(14,766	)		(13,011	)		(49,268	)		(58,266	)
Discontinued operations:
Income (loss) from discontinued operations		(1,061	)		(275	)		(994	)		(2,063	)
Gain on sale of real estate from discontinued operations		6,619			3,209			12,279			10,141
Income tax expense from discontinued operations		(1,945	)		(1,027	)		(3,950	)		(2,827	)
Net income from discontinued operations		3,613			1,907			7,335			5,251
Net loss		(11,153	)		(11,104	)		(41,933	)		(53,015	)
Net loss attributable to non-controlling interests		2,140			1,527			7,260			8,548
Net loss attributable to American Realty Investors, Inc.		(9,013	)		(9,577	)		(34,673	)		(44,467	)
Preferred dividend requirement		(626	)		(622	)		(1,870	)		(1,866	)
Net loss applicable to common shares	$	(9,639	)	$	(10,199	)	$	(36,543	)	$	(46,333	)

Earnings per share - basic
Loss from continuing operations	$	(1.15	)	$	(1.05	)	$	(3.81	)	$	(4.48	)
Discontinued operations		0.31			0.17			0.64			0.46
Net loss applicable to common shares	$	(0.84	)	$	(0.88	)	$	(3.17	)	$	(4.02	)

Earnings per share - diluted
Loss from continuing operations	$	(1.15	)	$	(1.05	)	$	(3.81	)	$	(4.48	)
Discontinued operations		0.31			0.17			0.64			0.46
Net loss applicable to common shares	$	(0.84	)	$	(0.88	)	$	(3.17	)	$	(4.02	)

Weighted average common share used in computing earnings per share		11,485,444			11,514,038			11,503,163			11,514,038
Weighted average common share used in computing diluted earnings per share		11,485,444			11,514,038			11,503,163			11,514,038


Amounts attributable to American Realty Investors, Inc.
Loss from continuing operations	$	(12,626	)	$	(11,484	)	$	(42,008	)	$	(49,718	)
Income from discontinued operations		3,613			1,907			7,335			5,251
Net loss	$	(9,013	)	$	(9,577	)	$	(34,673	)	$	(44,467	)



AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)

	September 30,			December 31,
		2010			2009
	(dollars in thousands, except share and par value amounts)
Assets
Real estate, at cost	$	1,598,514		$	1,718,837
Real estate held for sale at cost, net of depreciation		16,251			5,147
Real estate subject to sales contracts at cost, net of depreciation		48,001			53,341
Less accumulated depreciation		(185,078	)		(195,804	)
Total real estate		1,477,688			1,581,521
Notes and interest receivable
Performing		117,251			91,872
Non-performing		3,114			3,108
Less allowance for estimated losses		(11,836	)		(11,836	)
Total notes and interest receivable		108,529			83,144
Cash and cash equivalents		6,711			4,887
Investments in unconsolidated subsidiaries and investees		12,563			13,149
Other assets		112,970			123,353
Total assets	$	1,718,461		$	1,806,054

Liabilities and Shareholdersa� Equity
Liabilities:
Notes and interest payable	$	1,216,817		$	1,327,188
Notes related to assets held-for-sale		15,036			5,002
Notes related to subject to sales contracts		53,140			61,886
Stock-secured notes payable		33,325			24,853
Affiliate payables		34,069			20,574
Deferred revenue		104,147			70,083
Accounts payable and other liabilities		96,537			85,119
		1,553,071			1,594,705

Shareholdersa� equity:
Preferred stock, $2.00 par value, authorized 15,000,000 shares, issued and outstanding Series A, 3,390,913 shares in 2010 and in 2009 (liquidation preference $33,909), including 900,000 shares in 2010 and 2009 held by subsidiaries		4,979			4,979
Common stock, $.01 par value, authorized 100,000,000 shares; issued 11,874,138, and outstanding 11,477,077 and 11,514,038 shares in 2010 and in 2009		114			114
Treasury stock at cost; 397,061 and 360,100 shares in 2010 and 2009 and 277,172 shares held by TCI (consolidated) as of 2010 and 2009		(6,250	)		(5,954	)
Paid-in capital		91,081			91,081
Retained earnings		10,428			46,971
Accumulated other comprehensive income (loss)		(786	)		2,186
Total American Realty Investors, Inc. shareholders' equity		99,566			139,377
Non-controlling interest		65,824			71,972
Total equity		165,390			211,349
Total liabilities and equity	$	1,718,461		$	1,806,054

Contributing Sources

Market Wire

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American Realty Investors, Inc. Reports Third Quarter 2010 Results