American Realty Investors, Inc. Reports Second Quarter 2019 Results

DALLAS--()--American Realty Investors, Inc. (NYSE:ARL), a Dallas-based real estate investment company, today reported results of operations for the quarter ended June 30, 2019. For the three months ended June 30, 2019, we reported a net loss applicable to common shares of $2.8 million or ($0.17) per diluted loss per share compared to a net income applicable to common shares of $5.6 million or ($0.35) per diluted loss per share for the same period ended 2018.

We would like to take a brief moment to share with you our recent successes for TCI and affiliated Companies and thank you for your steadfast dedication to the company.

2018 and 2019 have been met with unprecedented expansion and repositioning for Pillar, TCI, SPC, and affiliated Companies. We ended 2018 with our largest and most strategic transactions, the newly created subsidiary Victory Abode Apartments, LLC (“VAA”) Joint Venture and Bond Series B raised on the Tel Aviv Stock Exchange. In 2019, the company recently raised an additional $78 million bond series C on the Tel Aviv Stock Exchange. This expanded offering creates additional financial strength to our already thriving organization. With these existing and newly engaged projects and our continuously burgeoning multifamily asset base, we are committed to the continued growth and education of our staff.

The JV’s primary focus is to create a business platform that will allow dramatic expansion in the multifamily arena. The intent is to increase the overall size of the portfolio over the next several years through strategic buildout of its robust development pipeline alongside opportunistic acquisitions.

All of these initiatives further demonstrate our ability to increase shareholder value, aligning with the strategic direction we announced three years ago. Our company has been dramatically transformed to a highly viable operating company with solid development capabilities in the multifamily arena. Our main goal has always been to act in the best interest of the company and protect asset value for its investors. We continue to invest in new development projects and grow the company’s asset base.

Revenues

Rental and other property revenues were $11.8 million for the three months ended June 30, 2019, compared to $31.6 million for the same period in 2018. The $19.8 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 fifty-three multifamily residential apartment buildings for the same period a year ago as a result of the deconsolidation of forty-nine 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 $8.2 million to $7.3 million for the three months ended June 30, 2019 as compared to $15.5 million for the same period in 2018. The decrease in property operating expenses is primarily due to the deconsolidation of forty-nine 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 $1.8 million, real estate taxes of $2.4 million, management fees paid to third parties of $0.7 million, and other general property operating and maintenance expenses of $3.3 million.

Depreciation and amortization decreased by $3.1 million to $3.4 million during the three months ended June 30, 2019 as compared to $6.5 million for the three months ended June 30, 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 $4.1 million for the three months ended June 30, 2019 and $2.9 million for the same period in 2018. The increase of $1.2 million in general and administrative expenses is due primarily to increases in fees paid to our Advisors of $0.9 million, franchise taxes of $0.1 million, and professional fees of $0.2 million.

Other income (expense)

Interest income was $6.5 million for the three months ended June 30, 2019, compared to $4.9 million for the same period in 2018. The increase of $1.6 million was due primarily to an increase of $1.5 million in interest on the receivables owed by our Advisors.

Other income was $3.4 million for the three months ended June 30, 2019, compared to $7.5 million for the same period in 2018. The decrease of $4.1 was due primarily to cash proceeds of $3.1 million received during the quarter ended June 30, 2019, from the collection of tax increment incentives related to infrastructure development work at Mercer Crossing, located in Farmers Branch, Texas, compared to insurance proceeds received during the second quarter of 2018 of approximately $6.6 million as a result of damages caused by a hurricane to one of our properties that was subsequently sold during the same quarter.

Mortgage and loan interest expense was $9.4 million for the three months ended June 30, 2019 as compared to $15.9 million for the same period in 2018. The decrease of $6.5 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 $2.3 million for the three months ended June 30, 2019 as compared to a gain of $5.9 million for the same period in 2018. The foreign currency loss is due primarily to a decrease in the exchange rate of our Israel New Shekels (NIS) denominated corporate bonds registered on the Tel-Aviv Stock Exchange. The exchange rate of the NIS to USD went from 3.63 at the beginning of the second quarter to an exchange rate of 3.58 at June 30, 2019. As of June 30, 2019, we have outstanding bonds of $159.4 million (or NIS 570 million) and accrued interest payable of approximately $2.8 million (or NIS 10.1 million).

Loss from unconsolidated investments was a net of $0.06 million for the three months ended June 30, 2019 as compared to earnings of $0.28 million for the three months ended June 30, 2018. The loss from unconsolidated investments during the second quarter just ended was driven primarily from our share in the losses reported by our VAA Joint Venture of $0.24 million offset by earnings from other unconsolidated investees of $0.17 million.

Loss from the sale of income-producing property increased for the three months ended June 30, 2019 as compared to the prior period. In the current period, we sold a multifamily residential property, located in Mary Ester, Florida for a sales price of $3.1 million and recorded a loss of $0.08 million. There were no apartment sales for the three months ended June 30, 2018.

Gain on land sales increased for the three months ended June 30, 2019 as compared to the prior period. In the current period, we sold 41.6 acres of land for an aggregate sales price of $7.6 million and recorded a gain of $2.5 million. There were no land sales for the three months ended June 30, 2018.

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,

 

 

 

2019

 

2018

 

2019

 

2018

Revenues:
Rental and other property revenues (including $202 and $208 for the three months and $413 and $415 for the six months ended 2019 and 2018, respectively, from related parties)

$

11,840

 

$

31,607

 

$

23,769

 

$

62,690

 

 
Expenses:
Property operating expenses (including $246 and $231 for the three months ended and $504 and $458 for the six months ended 2019 and 2018, respectively, from related parties)

 

7,323

 

 

15,550

 

 

13,320

 

 

29,974

 

Depreciation and amortization

 

3,439

 

 

6,504

 

 

6,548

 

 

12,895

 

General and administrative (including $985 and $1,297 for the three months ended and $2,582 and $2,437 for the six months ended 2019 and 2018, respectively, from related parties)

 

4,127

 

 

2,954

 

 

6,732

 

 

5,295

 

Net income fee to related party

 

90

 

 

53

 

 

190

 

 

106

 

Advisory fee to related party

 

1,238

 

 

2,929

 

 

3,091

 

 

5,885

 

Total operating expenses

 

16,217

 

 

27,990

 

 

29,881

 

 

54,155

 

Net operating (loss) income

 

(4,377

)

 

3,617

 

 

(6,112

)

 

8,535

 

Other income (expenses):
Interest income (including $6,207 and $4,832 for the three months ended and $12,304 and $9,311 for the six months ended 2019 and 2018, respectively, from related parties)

 

6,505

 

 

4,882

 

 

12,658

 

 

9,991

 

Other income

 

3,364

 

 

7,537

 

 

7,031

 

 

9,438

 

Mortgage and loan interest (including $2,385 and $1,909 for the three months ended and $4,692 and $3,708 for the six months ended 2019 and 2018, respectively, from related parties)

 

(9,408

)

 

(15,907

)

 

(19,376

)

 

(31,631

)

Foreign currency transaction (loss) gain

 

(2,325

)

 

5,889

 

 

(8,143

)

 

7,645

 

Equity loss from VAA

 

(236

)

 

-

 

 

(1,291

)

 

-

 

Earnings from unconsolidated subsidiaries and investees

 

173

 

 

277

 

 

231

 

 

597

 

Total other (expenses) income

 

(1,927

)

 

2,678

 

 

(8,890

)

 

(3,960

)

(Loss) income before gain on land sales, non-controlling interest, and taxes

 

(6,304

)

 

6,295

 

 

(15,002

)

 

4,575

 

Loss on sale of income producing properties

 

(80

)

 

-

 

 

(80

)

 

-

 

Gain on land sales

 

2,517

 

 

-

 

 

4,733

 

 

1,335

 

Net (loss) income from continuing operations before taxes

 

(3,867

)

 

6,295

 

 

(10,349

)

 

5,910

 

Net (loss) income from continuing operations

 

(3,867

)

 

6,295

 

 

(10,349

)

 

5,910

 

Net (loss) income

 

(3,867

)

 

6,295

 

 

(10,349

)

 

5,910

 

Net (income) loss attributable to non-controlling interest

 

1,089

 

 

(441

)

 

1,424

 

 

(716

)

Net (loss) income attributable to American Realty Investors, Inc.

 

(2,778

)

 

5,854

 

 

(8,925

)

 

5,194

 

Preferred dividend requirement

 

-

 

 

(225

)

 

-

 

 

(450

)

Net (loss) income applicable to common shares

$

(2,778

)

$

5,629

 

$

(8,925

)

$

4,744

 

(Loss) earnings per share - basic
Net (loss) income from continuing operations

$

(0.17

)

$

0.35

 

$

(0.56

)

$

0.30

 

 
(Loss) earnings per share - diluted
Net (loss) income from continuing operations

$

(0.17

)

$

0.34

 

$

(0.56

)

$

0.28

 

 
Weighted average common shares used in computing earnings per share

 

15,997,076

 

 

15,997,076

 

 

15,997,076

 

 

15,967,740

 

Weighted average common shares used in computing diluted earnings per share

 

15,997,076

 

 

16,682,753

 

 

15,997,076

 

 

16,653,417

 

 
Amounts attributable to American Realty Investors, Inc.
Net (loss) income from continuing operations

$

(2,778

)

$

5,854

 

$

(8,925

)

$

5,194

 

Net (loss) income applicable to American Realty Investors, Inc.

$

(2,778

)

$

5,854

 

$

(8,925

)

$

5,194

 

 
 
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS

June 30,

 

December 31,

2019

 

2018

(unaudited)

 

(audited)

(dollars in thousands, except share and par value amounts)

Assets

Real estate, at cost

$

450,143

 

$

455,993

 

Real estate subject to sales contracts at cost

 

1,626

 

 

3,149

 

Real estate held for sale at cost, net of depreciation

 

14,737

 

 

-

 

Less accumulated depreciation

 

(83,084

)

 

(78,099

)

Total real estate

 

383,422

 

 

381,043

 

 
Notes and interest receivable (including $106,102 in 2019 and $105,803 in 2018 from related parties)

 

173,851

 

 

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

 

159,582

 

 

126,058

 

 
Cash and cash equivalents

 

37,644

 

 

36,428

 

Restricted cash

 

44,603

 

 

70,187

 

Investment in VAA

 

67,078

 

 

68,399

 

Investment in other unconsolidated investees

 

7,833

 

 

7,602

 

Receivable from related party

 

61,676

 

 

70,377

 

Other assets

 

55,715

 

 

66,055

 

Total assets

$

817,553

 

$

826,149

 

 

Liabilities and Shareholders’ Equity

Liabilities:
Notes and interest payable

$

293,079

 

$

286,968

 

Bond and interest payable

 

157,328

 

 

158,574

 

Deferred revenue (including $30,188 in 2019 and $33,904 in 2018 to related parties)

 

30,188

 

 

33,904

 

Accounts payable and other liabilities (including $11,363 in 2019 and $9,984 in 2018 to related parties)

 

26,292

 

 

25,576

 

Total liabilities

 

506,887

 

 

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

 

84,773

 

 

84,885

 

Retained earnings

 

170,741

 

 

179,666

 

Total American Realty Investors, Inc. shareholders' equity

 

249,288

 

 

258,325

 

Non-controlling interest

 

61,378

 

 

62,802

 

Total shareholders' equity

 

310,666

 

 

321,127

 

Total liabilities and shareholders' equity

$

817,553

 

$

826,149

 

 

Contacts

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

Contacts

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