American Realty Investors, Inc. Reports Fourth Quarter and Full Year 2011 Results

DALLAS--()--American Realty Investors, Inc. (NYSE:ARL), a Dallas-based real estate investment company, today reported results of operations for the fourth quarter ended December 31, 2011. For the three months ended December 31, 2011, the Company reported net income applicable to common shares of $0.2 million or $0.02 per share, as compared to a net loss applicable to common shares of $60.7 million or $5.35 per share for the same period ended 2010.

Our net income applicable to common shares increased $95 million as compared to the prior year. The current year net loss applicable to common shares was a loss of $2.2 million, which includes gain on land sales of $34.2 million and net income from discontinued operations of $33.5 million. The prior year net loss applicable to common shares was $97.2 million, which includes loss on land sales of $10.1 million and net income from discontinued operations of $2.6 million.

Rental and other property revenues were $118.3 million for the twelve months ended December 31, 2011. This represents an increase of $2.2 million as compared to the prior year revenues of $116.1 million. This change, by segment, is an increase in the apartment portfolio of $8.0 million, an increase in the hotel portfolio of $0.1 million, offset by a decrease in the commercial portfolio of $5.9 million. Within the apartment portfolio, the same properties increased by $3.2 million and the developed properties increased by $4.8 million. The multifamily housing portfolio has continued to thrive, with effective rates and occupancy increasing. Within the commercial portfolio, the same properties decreased by $5.9 million due to an increase in vacancy, which we attribute to the current state of the economy. We have directed our efforts to apartment development and put some additional land projects on hold until the economic conditions turn around. We are continuing to market our properties aggressively to attract new tenants and strive for continuous improvement of our properties in order to maintain our existing tenants.

Property operating expenses were $67.2 million for the twelve months ended December 31, 2011. This represents an increase of $0.4 million as compared to the prior year operating expenses of $66.8 million. This change, by segment, is an increase in our apartment portfolio of $2.2 million, an increase in our hotel portfolio of $0.2 million, offset by a decrease in our commercial portfolio of $1.0 million and a decrease in our land and other portfolios of $1.0 million. Within the apartment portfolio, the same properties decreased by $0.2 million due to a decrease in overall costs and additional repairs and maintenance. The developed properties increased expenses by $2.4 million. The increase in our hotel portfolio is due to the increase in variable costs that are directly associated with stays within the hotel. Within the commercial portfolio, the same properties decreased by $1.0 million.

Depreciation expense was $20.4 million for the twelve months ended December 31, 2011. This represents a decrease of $1.7 million as compared to the prior year depreciation expense of $22.1 million. This change, by segment, is an increase in our apartment portfolio of $0.6 million, an increase in our other portfolio of $0.2 million, offset by a decrease in our commercial portfolio of $2.5 million. Within the apartment portfolio, the same properties decreased by $0.6 million and the developed properties in the lease-up phase increased by $1.2 million. Once an apartment complex is considered “stabilized,” we begin to depreciate the assets. The decrease in the commercial portfolio of $2.5 million was attributable to the same properties.

The current year provision for impairment of notes receivable, investment in real estate partnerships, and real estate assets was $49.1 million. This was a decrease of $2.5 million as compared to the prior year expense of $51.6 million. In the current year, impairment was recorded as an additional loss in the investment portfolio of $5.2 million in the apartment properties we currently hold, $5.3 million in commercial properties we currently hold, $21.6 million in land parcels we currently hold, $6.6 million in land that was sold, $0.4 million in impairment on our investments in unconsolidated entities and a $10.0 million reserve related to the assets held by American Realty Trust, Inc. at December 31, 2011. The majority of the impairment losses were taken on the properties that are treated as “subject to sales contract” where, subsequent to the sale to a related party under common control, negotiations have occurred for the property ownership to transfer to the lender and estimated current property values are lower than our current basis. In 2010, impairment was recorded as an additional loss in the investment portfolio of $47.6 million in land we currently hold and a $4.0 million increase in impairment on notes receivable.

Other income was $2.4 million for the twelve months ended December 31, 2011. This represents a decrease of $6.4 million as compared to the prior year income of $8.8 million. The decrease was due to revenue received in the prior year for an incentive fee.

Interest income was $10.9 million for the twelve months ended December 31, 2011. This represents an increase of $2.5 million as compared to the prior year income of $8.4 million. This change was due to the receipt of interest payments due on our Unified Housing surplus cash flow notes. Interest is recognized when interest payments are received. More interest payments were received in the current year.

Mortgage and loan interest expense was $60.7 million for the twelve months ended December 31, 2011. This represents a decrease of $5.5 million as compared to the prior year expense of $66.2 million. This change, by segment, is a decrease in the apartment portfolio of $0.8 million, a decrease in the commercial portfolio of $0.3 million, a decrease in the land portfolio of $2.8 million and a decrease in the other portfolio of $1.6 million. Within the apartment portfolio, the same apartment portfolio decreased $3.4 million and the developed properties increased $2.6 million due to properties in the lease-up phase. Once an apartment is completed, the interest expense is no longer capitalized. The land portfolio decrease was due to land sales.

Gain on land sales increased for the twelve months ended December 31, 2011, as compared to the prior period. In the current period, we sold 7,821.97 acres of land in 46 separate transactions for an aggregate sales price of $249.5 million, receiving $121,710 in cash and recorded a gain of $34.2 million. The average sales price was $31,896 per acre. In the prior year, we sold 1,243.88 acres of land in 17 separate transactions for an aggregate sales price of $31.0 million, receiving $8,984 in cash and recorded a loss of $10.1 million.

Discontinued operations relates to properties that were either sold or held for sale as of the year ended December 31, 2011. Included in discontinued operations are a total of 20 and 31 properties as of 2011 and 2010, respectively. Properties sold in 2011 that were held in 2010 have been reclassified to discontinued operations for 2010.

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.americanrealtyinvest.com.

     
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
For the Years Ended December 31,
2011 2010 2009
(dollars in thousands, except share and par value amounts)
Revenues:
Rental and other property revenues (including $223 and $955 and $1,118 for 2011 and 2010 and 2009 respectively from affiliates and related parties) $ 118,357 $ 116,123 $ 113,318
 
Expenses:
Property operating expenses (including $1,252 and $1,026 and $1,634 for 2011 and 2010 and 2009 respectively from affiliates and related parties) 67,203 66,841 64,488
Depreciation and amortization 20,380 22,105 19,602
General and administrative (including $2,429 and $4,517 and $5,867 for 2011 and 2010 and 2009 respectively from affiliates and related parties) 13,719 12,212 14,254
Provision on impairment of notes receivable and real estate assets 49,146 51,588 44,578
Advisory fee to affiliate   13,225     15,770     15,683  
Total operating expenses   163,673     168,516     158,605  
Operating loss (45,316 ) (52,393 ) (45,287 )
 
Other income (expense):
Interest income (including $9,989 and $7,363 and $8,886 for 2011 and 2010 and 2009 respectively from affiliates and related parties) 10,948 8,425 9,701
Other income 2,393 8,788 3,550
Mortgage and loan interest (including $1,710 and $3,374 and $2,595 for 2011 and 2010 and 2009 respectively from affiliates and related parties) (60,713 ) (66,229 ) (65,757 )
Gain on the sale of investments 91 673 -
Earnings from unconsolidated subsidiaries and investees 79 (200 ) 35
Gain on foreign currency translation - 222 292
Litigation settlement   -     -     (1,056 )
Total other expenses   (47,202 )   (48,321 )   (53,235 )
Loss before gain on land sales, non-controlling interest, and taxes (92,518 ) (100,714 ) (98,522 )
Gain (loss) on land sales   34,247     (10,103 )   11,605  
Loss from continuing operations before tax (58,271 ) (110,817 ) (86,917 )
Income tax benefit   18,040     2,030     1,490  
Net loss from continuing operations   (40,231 )   (108,787 )   (85,427 )
Discontinued operations:
Loss from discontinued operations (5,363 ) (15,318 ) (5,848 )
Gain on sale of real estate from discontinued operations 56,907 19,306 10,106
Income tax expense from discontinued operations   (18,040 )   (1,396 )   (1,490 )
Net income from discontinued operations 33,504 2,592 2,768
Net income (loss) (6,727 ) (106,195 ) (82,659 )
Net loss attributable to non-controlling interests   7,017     11,448     12,518  
Net income (loss) attributable to American Realty Investors, Inc. 290 (94,747 ) (70,141 )
Preferred dividend requirement   (2,456 )   (2,488 )   (2,488 )
Net income (loss) applicable to common shares $ (2,166 ) $ (97,235 ) $ (72,629 )
 
Earnings per share - basic
Loss from continuing operations $ (3.10 ) $ (8.71 ) $ (6.55 )
Discontinued operations   2.91     0.23     0.24  
Net income (loss) applicable to common shares $ (0.19 ) $ (8.48 ) $ (6.31 )
 
Earnings per share - diluted
Loss from continuing operations $ (3.10 ) $ (8.71 ) $ (6.55 )
Discontinued operations   2.91     0.23     0.24  
Net income (loss) applicable to common shares $ (0.19 ) $ (8.48 ) $ (6.31 )
 
Weighted average common share used in computing earnings per share 11,517,431 11,463,084 11,514,038
Weighted average common share used in computing diluted earnings per share 11,517,431 11,463,084 11,514,038
 
 
Amounts attributable to American Realty Investors, Inc.
Loss from continuing operations $ (40,231 ) $ (108,787 ) $ (85,427 )
Income from discontinued operations   33,504     2,592     2,768  
Net income (loss) $ (6,727 ) $ (106,195 ) $ (82,659 )
   
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
 
December 31, December 31,
2011 2010
(dollars in thousands, except share and par value amounts)
Assets
Real estate, at cost $ 1,120,122 $ 1,170,214

Real estate held for sale at cost, net of depreciation ($1,752 for 2011 and $0 for 2010 )

15,015 -
Real estate subject to sales contracts at cost, net of depreciation ($9,790 for 2011 and $75,639 for 2010) 49,982 295,921
Less accumulated depreciation   (158,489 )   (133,550 )
Total real estate 1,026,630 1,332,585
Notes and interest receivable
Performing (including $104,969 in 2011 and $89,982 in 2010 from affiliates and related parties) 110,136 99,839
Non-performing 4,787 3,123
Less allowance for estimated losses (including $8,962 and $9,926 in 2011 and 2010 from affiliates and related parties)   (13,383 )   (14,348 )
Total notes and interest receivable 101,540 88,614
Cash and cash equivalents 20,312 12,649
Investments in unconsolidated subsidiaries and investees 10,746 12,491
Other assets (including $11 in 2011 and $164 in 2010 from affiliates and related parties)   76,243     110,936  
Total assets $ 1,235,471   $ 1,557,275  
 
Liabilities and Shareholders’ Equity
Liabilities:
Notes and interest payable $ 855,619 $ 913,134
Notes related to assets held for sale 13,830 -
Notes related to assets subject to sales contracts 44,516 315,547
Stock-secured notes payable 26,898 23,100
Affiliate payables 10,294 12,219
Deferred revenue (including $71,964 in 2011 and $90,496 in 2010 from sales to related parties) 78,750 98,504
Accounts payable and other liabilities (including $1,822 in 2011 and $1,558 in 2010 to affiliates and related parties)   110,307     88,506  
1,140,214 1,451,010
 
Shareholders’ equity:
Preferred stock, $2.00 par value, authorized 15,000,000 shares, issued and outstanding Series A, 3,353,954 shares in 2011 and $3,389,546 in 2010 (liquidation preference $10 per share), including 900,000 shares in 2011 and 2010 held by subsidiaries 4,908 4,979
Common stock, $.01 par value, authorized 100,000,000 shares; issued 11,941,174 and 11,874,138, and outstanding 11,525,389 and 11,466,853 shares in 2011 and in 2010 115 114
Treasury stock at cost; 415,785 and 407,285 shares in 2011 and 2010 and 236,587 and 276,972 shares held by TCI (consolidated) as of 2011 and 2010 (6,395 ) (6,333 )
Paid-in capital 105,388 110,419
Retained earnings (47,486 ) (47,776 )
Accumulated other comprehensive loss   (786 )   (786 )

Total American Realty Investors, Inc. shareholders' equity

  55,744     60,617  
Non-controlling interest   39,513     45,648  
Total equity   95,257     106,265  
Total liabilities and equity $ 1,235,471   $ 1,557,275  

Contacts

American Realty Investors, Inc.
Investor Relations, 800-400-6407
investor.relations@americanrealtyinvest.com

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Contacts

American Realty Investors, Inc.
Investor Relations, 800-400-6407
investor.relations@americanrealtyinvest.com