American Realty Investors, Inc. Reports Third Quarter 2009 Results

DALLAS, Nov 13, 2009 (BUSINESS WIRE) -- American Realty Investors, Inc.

(NYSE:ARL), a Dallas-based real estate investment company, reported a net loss applicable to common shares of ($46.3) million or ($4.13) per diluted earnings per share, for the nine months ended September 30, 2009, as compared to a net income applicable to common shares of $38.3 million or $3.64 per diluted earnings per share for the same period ended 2008.

In addition, the Company reported a net loss applicable to common shares of ($10.2) million or ($.92) per diluted earnings per share, as compared to a net loss applicable to common shares of ($8.5) million or ($.80) per diluted earnings per share for the three months ended September 30, 2009, as for the same period ended 2008.

Comparison of the three months ended September 30, 2009 as compared to the same period ended 2008 Property operating expenses decreased by $2.1 million as compared to prior year period which by segment is a decrease in the apartment portfolios of $0.3 million, commercial portfolio of $1.2 million, hotel portfolio of $0.5 million and land and other portfolio of $0.1 million. Within the apartment portfolio, decreases came from same properties, which decreased $0.7 million, and developed properties increased by $0.4 million. Within the commercial properties, the same properties decreased $2.4 million and the acquired properties increased $1.2 million.

Other income decreased $2.5 million as compared to the prior year period. The majority of the decrease is from the gains on our disposition of our investment in the Korean REIT in 2009.

Earnings from unconsolidated subsidiaries increased $2.8 million as compared to the prior year period. The increase is attributable to the lack of activity within the entities. In the prior year period, these entities had large non-recurring gains from the sale of properties.

Discontinued operations for the three months ended September 30, 2009, relates to four properties sold, a shopping center and office building held for sale.

The gains from the sales are included in the 2009 discontinued operations. In addition, we recognized the deferred gain on the sale of a building sold 2002 and the deferred gain from collection of two note receivables in accordance with the requirements per SFAS No. 66. The discontinued operations for 2008 relates to 31 income producing properties of which 27 were sold in 2008 consisting of 20 apartments, three commercial buildings, four hotels. There were three apartments and one commercial property sold, and an office building and a shopping center held for sale during 2009.

Comparison of the nine months ended September 30, 2009 as compared to the same period ended 2008 Rental and other property revenues increased by $5.8 million as compared to the prior year period which by segment was an increase in the apartment portfolio of $9.5 million and an increase in the commercial portfolio of $2.1 million, offset by a decrease in the hotel portfolio of $3.5 million, a decrease in the land portfolio of $1.6 million and a decrease in the other portfolio of $0.7 million.

Within the apartment portfolio, the increase was attributable to a $10.8 million from developed properties in the lease up phase and $0.9 million from newly acquired properties, offset by a $2.2 million decrease in the same property portfolio. Within the commercial portfolio, the increase was attributable to a $3.3 million increase from newly acquired properties and a $1.2 million decrease from the same properties.

Property operating expenses decreased by $6.3 million as compared to the prior year period which by segment is an increase in the apartment portfolios of $1.6 million, a decrease in the commercial properties of $1.5 million, hotel portfolio of $1.8 million and land and other portfolio of $4.6 million. Within the apartment portfolio, increases came from developed properties, which increased by $2.1 million and same properties decreased $0.5 million. Within the commercial properties, the same properties decreased $3.0 million and the acquired properties increased $1.5 million.

Depreciation and amortization increased $3.7 million as compared to the prior year period which by segment was an increase in the apartment portfolio of $2.9 million and an increase in the commercial portfolio of $0.8 million. Within the apartment portfolio, the developed properties increased $2.9 million. Within the commercial portfolio, the acquired properties increased $0.8 million.

Interest income decreased by $3.5 million as compared to the same period ended 2008. The decrease is due to the receipt of cash on the receivables from Unified Housing Foundation, Inc. The notes are excess cash flow notes. Interest on the notes is recorded as cash is received. Less cash was received in the current period as compared to the prior period.

Earnings from unconsolidated subsidiaries decreased $2.5 million as compared to prior year period. The decrease is attributable to the lack of activity within the entities. In the prior year period, these entities had large non-recurring gains from the sale of properties.

Provision on impairment of notes receivable, investment in real estate partnerships, and real estate assets increased by $18.6 million as compared to the prior year period. Based upon the company's estimates of the fair market value of the investments, impairments were recorded resulting in a loss in the investment portfolio of $18.0 million. Based upon ARL's estimates of fair market value of its real estate assets, impairments were recorded in land we currently hold. Further, the Company incurred a $9.6 million loss for land that was sold in the third quarter. As of September 30, 2009, the land that was sold was impaired to reflect the reduced value. In the prior year period, we posted a provision for doubtful collections on our receivables of $5.0 million and a $7.0 million reserve for certain investments within our portfolio.

Discontinued operations for the nine months ended September 30, 2009, relates to four properties sold, a shopping center and office building held for sale. The gains from the sales are included in the 2009 discontinued operations. In addition, we recognized the deferred gain on the sale of a building sold 2002 and the deferred gain from collection of two note receivables in accordance with the requirements per SFAS No. 66. The discontinued operations for 2008 relates to 31 income producing properties of which 27 were sold in 2008 consisting of 20 apartments, three commercial buildings, four hotels. There were three apartments and one commercial property sold, and an office building and a shopping center held for sale during 2009.

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. We invest in real estate through direct equity ownership and partnerships nationwide. For more information, go to ARL's web site at www.amrealtytrust.com.

AMERICAN REALTY INVESTORS, INC. CONSOLIDATED BALANCE SHEETS (unaudited) September 30, December 31, 2009 2008 (dollars in thousands, except share and par value amounts) Assets Real estate, at cost $ 1,728,106 $ 1,712,506 Real estate held for sale at cost, net of depreciation 5,375 10,333 Real estate subject to sales contracts at cost, net of depreciation 53,780 55,100 Less accumulated depreciation (191,384 ) (164,537 ) Total real estate 1,595,877 1,613,402 Notes and interest receivable Performing 100,499 68,845 Non-performing 3,135 20,032 Less allowance for estimated losses (11,836 ) (11,874 ) Total notes and interest receivable 91,798 77,003 Cash and cash equivalents 1,825 6,042 Restricted cash - 271 Investments in securities - 2,775 Investments in unconsolidated subsidiaries and investees 15,765 27,113 Other assets 106,570 115,547 Total assets $ 1,811,835 $ 1,842,153 Liabilities and Shareholders' Equity Liabilities: Notes and interest payable $ 1,336,237 $ 1,311,935 Notes related to assets held-for-sale 4,646 7,722 Notes related to subject to sales contracts 62,021 62,972 Stock-secured notes payable 13,923 14,026 Affiliate payables 2,819 23,018 Accounts payable and other liabilities 149,756 124,902 1,569,402 1,544,575 Commitments and contingencies: Shareholders' equity: Preferred Stock, $2.00 par value, authorized 15,000,000 shares, 4,979 4,979 issued and outstanding Series A, 3,390,913 shares in 2009 and in 2008 (liquidation preference $33,909), including 900,000 shares in 2009 and 2008 held by subsidiaries Common Stock, $.01 par value, authorized 100,000,000 shares; issued 114 114 11,874,138 shares in 2009 and in 2008 Treasury stock at cost; 637,072 shares in 2009 and 2008, which (5,954 ) (5,954 ) includes 276,972 shares held by TCI (consolidated) as of 2009 and 2008 Paid-in capital 91,646 92,609 Retained earnings 73,266 119,599 Accumulated other comprehensive income 2,185 4,331 Total American Realty Investors, Inc. shareholders' equity 166,236 215,678 Non-controlling interest 76,197 81,900 Total equity 242,433 297,578 Total liabilities and equity $ 1,811,835 1,842,153 AMERICAN REALTY INVESTORS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) For the Three Months Ended For the Nine Months Ended September 30, September 30, 2009 2008 2009 2008 (dollars in thousands, except share and per share amounts) Revenues: Rental and other property revenues $ 46,939 $ 46,367 $ 141,244 $ 135,421 Expenses: Property operating expenses 27,791 29,905 82,122 88,463 Depreciation and amortization 6,851 5,875 22,991 19,340 General and administrative 4,694 3,107 9,709 10,876 Advisory fee to affiliate 3,090 3,847 11,706 11,742 Total operating expenses 42,426 42,734 126,528 130,421 Operating income 4,513 3,633 14,716 5,000 Other income (expense): Interest income 583 2,389 4,279 7,824 Other income 77 2,546 4,148 4,612 Mortgage and loan interest (22,126 ) (21,071 ) (66,707 ) (65,794 ) Earnings from unconsolidated subsidiaries and investees 410 (2,399 ) 43 2,576 Gain on foreign currency translation 464 (480 ) 542 (480 ) Provision on impairment of notes receivable and real estate assets - - (30,639 ) (12,000 ) Litigation settlement (1,438 ) (66 ) (1,120 ) 785 Total other expenses (22,030 ) (19,081 ) (89,454 ) (62,477 ) Loss before gain on land sales, non-controlling interest, and taxes (17,517 ) (15,448 ) (74,738 ) (57,477 ) Gain on land sales 3,397 1,172 11,605 5,337 Loss from continuing operations before tax (14,120 ) (14,276 ) (63,133 ) (52,140 ) Income tax benefit 1,056 1,615 3,421 34,818 Net loss from continuing operations (13,064 ) (12,661 ) (59,712 ) (17,322 ) Discontinued operations: Income (loss) from discontinued operations (11 ) 4,945 162 (14,678 ) Gain on sale of real estate from discontinued operations 3,027 245 10,141 115,379 Income tax expense from discontinued operations (1,056 ) (1,816 ) (3,606 ) (35,245 ) Net income (loss) (11,104 ) (9,287 ) (53,015 ) 48,134 Less: net income (loss) attributable to non-controlling interests 1,527 1,459 8,548 (8,001 ) Net income (loss) attributable to American Realty Investors, Inc. (9,577 ) (7,828 ) (44,467 ) 40,133 Preferred dividend requirement (622 ) (623 ) (1,866 ) (1,869 ) Net income (loss) applicable to common shares $ (10,199 ) $ (8,451 ) $ (46,333 ) $ 38,264 Earnings per share - basic Loss from continuing operations $ (1.09 ) $ (1.12 ) $ (5.54 ) $ (1.68 ) Discontinued operations 0.17 0.32 1.41 5.32 Net income (loss) applicable to common shares $ (0.92 ) $ (0.80 ) $ (4.13 ) $ 3.64 Earnings per share - diluted Loss from continuing operations $ (1.09 ) $ (1.12 ) $ (5.54 ) $ (1.68 ) Discontinued operations 0.17 0.32 1.41 5.32 Net income (loss) applicable to common shares $ (0.92 ) $ (0.80 ) $ (4.13 ) $ 3.64 Weighted average common share used in computing earnings per share 11,237,066 10,575,107 11,237,066 10,490,041 Weighted average common share used in computing diluted earnings per 11,237,066 10,575,107 11,237,066 10,490,041 share Amounts attributable to American Realty Investors, Inc. Loss from continuing operations $ (11,536 ) $ (11,202 ) $ (60,342 ) $ (15,747 ) Income from discontinued operations 1,959 3,374 15,875 55,880 Net income (loss) $ (9,577 ) $ (7,828 ) $ (44,467 ) $ 40,133 SOURCE: American Realty Investors, Inc.

CONTACT: American Realty Investors, Inc. Investor Relations, 800-400-6407 [e-mail] Copyright Business Wire 2009 -0- KEYWORD: United States

North America

Texas INDUSTRY KEYWORD: REIT

Construction & Property

Commercial Building & Real Estate SUBJECT CODE: Earnings