Market Overview

American Realty Investors, Inc. Reports Second Quarter 2018 Results

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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, 2018. For the three months ended June 30, 2018,
we reported a net income applicable to common shares of $5.6 million or
($0.35) per diluted loss per share compared to a net loss applicable to
common shares of $11.2 million or ($0.72) per diluted loss per share for
the same period ended 2017.

The Company maintained its overall focus on growing its portfolio and is
working on several strategic initiatives that we previously announced
earlier this year. Overall, management remains very encouraged about the
overall performance of the company; especially tied to the quality of
our assets in our portfolio, and the new multifamily apartment projects
under various stages of development.

Revenues

Rental and other property revenues were $31.6 million for the three
months ended June 30, 2018 and 2017. The change by segment was an
increase in revenues in the apartment portfolio of approximately $1.2
million, offset by a decrease in revenues in the commercial portfolio of
$1.2 million.

Expense

Property operating expenses were $15.5 million for the three months
ended June 30, 2018. This represents an increase of $0.1 million
compared to the prior period operating expenses of $15.4 million. This
increase is driven primarily by an increase in property operating
expenses in the apartment portfolio of $1.0 million offset by a decrease
in operating expenses from our commercial portfolio of $0.7 million and
$0.2 million from the other portfolio.

Depreciation and amortization expense was $6.5 million for the three
months ended June 30, 2018, as compared to $6.4 million in the same
period of 2017. This increase was due primarily to the growth in our
apartment portfolio, which resulted in a $0.1 million increase in the
expense year over year.

General and Administrative expense was $2.9 million for the three months
ended June 30, 2018. This represents an increase of $1.0 million
compared to the prior period expense of $1.9 million. The increase is
due to an increase in expense reimbursements paid to our advisor of
approximately $0.7 million and professional fees for consulting, audit
and tax services of approximately $0.3 million.

Other income (expense)

Mortgage and loan interest expense was $15.9 million for the three
months ended June 30, 2018. This represents a decrease of $1.4 million
compared to the prior period expense of $17.3 million. The change by
segment represents a decrease in the other portfolio of $1.0 million,
$0.5 million in the land portfolio and $0.2 million in the commercial
portfolio offset by an increase of $0.3 million in the apartment
portfolio. Within the other portfolio the decrease is primarily due to
$1.2 million of interest expense savings related to maturing notes
payable paid during the first quarter of 2018.

Other income was $7.5 million for the three months ended June 30, 2018.
This represents an increase of $7.6 million as compared to prior period
other expense of $0.1 million. The increase is the result of insurance
proceeds of approximately $6.6 million received subsequent to the "as
is" sale of a property damaged by a hurricane, and other miscellaneous
income of approximately $1.0 million.

Foreign currency transaction was a gain of $5.9 million for the three
months ended June 30, 2018. This represents an increase of $9.3 million
compared to prior period foreign currency transaction loss of $3.4
million. The increase is the result of a gain in foreign currency
exchange as a result of the favorable exchange rate between the Israel
Shekels and the U.S. Dollar related to our Bond program.

For the three months ended June 30, 2018, we sold a golf course for a
total sales price of $2.3 million and recorded no gain or loss on the
sale. For the same period in 2017, the Company recorded a loss of
approximately $0.5 million from the sale of 8.3 acres of land for a
sales price of $0.5 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)
      Three Months Ended       Six Months Ended
June 30, June 30,
2018     2017 2018     2017
(dollars in thousands, except per share amounts)
Revenues:
Rental and other property revenues (including $208 and $199 for the
three months and $415 and $389 for the six months ended 2018 and
2017, respectively, from related parties)
$ 31,607 $ 31,587 $ 62,690 $ 63,409
 
Expenses:
Property operating expenses (including $231 and $239 for the three
months and $458 and 476 for the six months ended 2018 and 2017,
respectively, from related parties)
15,550 15,429 29,974 31,693
Depreciation and amortization 6,504 6,409 12,895 12,739
General and administrative (including $297 and $552 for the three
months and $2,437 and $1,295 for the six months ended 2018 and 2017,
respectively, from related parties)
2,954 1,995 5,295 4,026
Net income fee to related party 53 77 106 137
Advisory fee to related party   2,929     2,849     5,885     5,508  
Total operating expenses   27,990     26,759     54,155     54,103  
Net operating income 3,617 4,828 8,535 9,306
Other income (expenses):
Interest income (including $4,832 and $4,972 for the three months
and $9,311 and $9,092 for the six months ended 2018 and 2017,
respectively, from related parties)
4,882 5,059 9,991 9,852
Other income 7,537 (116 ) 9,438 1,327
Mortgage and loan interest (including $1,909 and $1,683 for the
three months and $3,708 and $3,195 for the six months ended 2018 and
2017, respectively, from related parties)
(15,907 ) (17,347 ) (31,631 ) (34,143 )
Foreign currency transaction gain (loss) 5,889 (3,425 ) 7,645 (3,747 )
Earnings from unconsolidated subsidiaries and investees   277     153     597     208  
Total other income (expenses)   2,678     (15,676 )   (3,960 )   (26,503 )
Income (loss) before gain on land sales, non-controlling interest,
and taxes
6,295 (10,848 ) 4,575 (17,197 )
Gain (loss) on land sales   -     (476 )   1,335     (31 )
Net income (loss) from continuing operations before taxes   6,295     (11,324 )   5,910     (17,228 )
Net income (loss) from continuing operations 6,295 (11,324 ) 5,910 (17,228 )
Net income (loss) 6,295 (11,324 ) 5,910 (17,228 )
Net (income) loss attributable to non-controlling interest   (441 )   435     (716 )   628  
Net income (loss) attributable to American Realty Investors, Inc. 5,854 (10,889 ) 5,194 (16,600 )
Preferred dividend requirement   (225 )   (275 )   (450 )   (550 )
Net income (loss) applicable to common shares $ 5,629   $ (11,164 ) $ 4,744   $ (17,150 )
Earnings per share - basic
Net loss from continuing operations $ 0.35   $ (0.72 ) $ 0.30   $ (1.11 )
 
Earnings per share - diluted
Net income (loss) from continuing operations $ 0.35   $ (0.72 ) $ 0.30   $ (1.11 )
 
Weighted average common shares used in computing earnings per share 15,997,076 15,514,360 15,967,740 15,514,360
Weighted average common shares used in computing diluted earnings
per share
15,997,076 15,514,360 15,967,740 15,514,360
 
Amounts attributable to American Realty Investors, Inc.
Net income (loss) from continuing operations $ 5,854   $ (10,889 ) $ 5,194   $ (16,600 )
Net income (loss) applicable to American Realty Investors, Inc. $ 5,854   $ (10,889 ) $ 5,194   $ (16,600 )
 
         
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2018 2017
(unaudited) (audited)
(dollars in thousands, except share and par value amounts)
Assets
Real estate, at cost $ 1,147,612 $ 1,117,429
Real estate subject to sales contracts at cost 46,262 48,234
Less accumulated depreciation   (183,630 )   (177,546 )
Total real estate 1,010,244 988,117
Notes and interest receivable:
Performing (including $104,665 in 2018 and $99,410 in 2017 from
related parties)
142,277 127,865
Less allowance for estimated losses (including $14,269 in 2018 and
2017 from related parties)
  (15,770 )   (15,770 )
Total notes and interest receivable 126,507 112,095
Cash and cash equivalents 28,116 42,920
Restricted cash 64,652 45,618
Investments in unconsolidated joint ventures and investees 6,993 6,396
Receivable from related party 55,987 38,311
Other assets   56,605     63,263  
Total assets $ 1,349,104   $ 1,296,720  
 
Liabilities and Shareholders' Equity
Liabilities:
Notes and interest payable $ 921,461 $ 898,750
Notes related to real estate held for sale 376 376
Notes related to real estate subject to sales contracts - 1,957
Bond and interest payable 143,897 113,049
Deferred revenue (including $57,289 in 2018 and $56,887 in 2017 to
related parties)
78,548 77,332
Accounts payable and other liabilities (including $9,764 in 2018 and
$11,893 in 2017 to related parties)
  31,655     39,373  
Total liabilities 1,175,937 1,130,837
 
Shareholders' equity:
Preferred stock, Series A: $2.00 par value, authorized 15,000,000
shares, issued and outstanding 1,800,614 and 2,000,614 shares in
2018 and 2017 (liquidation preference $10 per share), including
900,000 shares in 2018 and 2017 held by ARL.
1,805 2,205
Common stock, $0.01 par value, 100,000,000 shares authorized;
16,412,861 shares issued and 15,997,076 outstanding as of 2018 and
15,930,145 shares issued and 15,514,360 outstanding as of 2017,
including 140,000 shares held by TCI (consolidated) in 2018 and 2017.
164 159
Treasury stock at cost; 415,785 shares in 2018 and 2017, and 140,000
shares held by TCI (consolidated) as of 2018 and 2017
(6,395 ) (6,395 )
Paid-in capital 111,907 110,138
Retained earnings   11,161     5,967  
Total American Realty Investors, Inc. shareholders' equity 118,642 112,074
Non-controlling interest   54,525     53,809  
Total shareholders' equity   173,167     165,883  
Total liabilities and shareholders' equity $ 1,349,104   $ 1,296,720  

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