American Realty Investors, Inc. (NYSE:ARL), a Dallas-based real estate investment company, today reported results of operations for the second quarter ended June 30, 2014. ARL announced today that the Company reported net income applicable to common shares of $0.9 million, including $7.0 million in gains on the sale of income-producing properties, or $0.08 per diluted earnings per share, as compared to net income applicable to common shares of $7.7 million, including $18.1 million in gains on the sale of income-producing properties or $0.67 per diluted earnings per share for the same period ended 2013.
For the six months ending June 30, 2014, net income applicable to common shares of $3.8 million includes $20.6 million of depreciation expense, $3.8 million of litigation settlement expense and gains on the sale of real estate holdings of $13.1 million.
The Company’s commitment to enhance the value of our real estate holdings is proving successful in the results of operations. We continue to see growth in the multifamily market with increasing rents and stable operating expenses. We are diligent in our mission to provide high-quality living opportunities to our tenants as reflected in our occupancy rates over 95%.
In our commercial portfolio, we are seeing the benefit of our efforts with new leases executed and increasing rents as first year concessions expire. We believe that we will continue to see growth in our commercial portfolio as the economic conditions improve and we capitalize on the influx of attractive prospects in the pipeline.
Our ability to take advantage of lower-interest rate mortgages available has reduced our monthly obligations and increased cash flow within our multifamily portfolio.
The positive results of operations has allowed the Company to invest in mortgage receivables in various multifamily projects not under the Company’s ownership. We will continue to invest in the multifamily market, as conditions are optimal for achieving a high return on our investment.
Rental and other property revenues were $20.8 million for the three months ended June 30, 2014. This represents an increase of $0.4 million, as compared to the prior period revenues of $20.4 million. This change, by segment, is an increase in the apartment portfolio of $0.8 million, offset by a decrease in the commercial portfolio of $0.4 million related to some prior year larger square-foot tenants down-sizing or moving out and first year lease specials for new tenants. As the first year lease concessions expire and new leases are signed, we have and will continue to see improvements in rental income for the commercial portfolio.
Property operating expenses were $10.3 million for the three months ended June 30, 2014. This represents an increase of $0.9 million, as compared to the prior period operating expenses of $9.4 million. This change, by segment, is an increase in the apartment portfolio of $0.2 million and an increase in the commercial portfolio of $0.7 million. Our operating expenses have remained consistent with prior periods due to labor efficiencies and improvements in preventative maintenance across the portfolio, with only an increase in real estate taxes as a result of the increase in the value of our portfolio.
General and administrative expenses were $3.2 million dollars for the three months ended June 30, 2014. This represents an increase of $1.2 million, as compared to the prior period general and administrative expenses of $2.0 million. The majority of this change was due to an increase in professional fees and corporate franchise taxes.
Interest income was $6.0 million for the three months ending June 30, 2014. This represents an increase of $2.5 million, as compared to the prior period Interest income of $3.5 million dollars. The majority of the increase is due to the accrued interest recognition on the cash flow notes from Unified Housing Foundation, Inc. related to the mid-year surplus cash calculation. There was no mid-year surplus cash collected for the prior period.
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) | |||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| (dollars in thousands, except per share amounts) | |||||||||||||||||
| Revenues: | |||||||||||||||||
| Rental and other property revenues (including $175 and $166 for the three months and $350 and $331 for the six months ended 2014 and 2013, respectively, from related parties) | $ | 20,848 | $ | 20,402 | $ | 41,321 | $ | 40,637 | |||||||||
| Expenses: | |||||||||||||||||
| Property operating expenses (including $158 and $169 for the three months and $313 and $372 for the six months ended 2014 and 2013, respectively, from related parties) | 10,319 | 9,416 | 20,578 | 19,338 | |||||||||||||
| Depreciation and amortization | 4,481 | 4,331 | 8,952 | 8,080 | |||||||||||||
| General and administrative (including $842 and $997 for the three months and $1,760 and $1,887 for the six months ended 2014 and 2013, respectively, from related parties) | 3,196 | 2,041 | 5,188 | 4,053 | |||||||||||||
| Provision on impairment of notes receivable and real estate assets | - | 800 | - | 800 | |||||||||||||
| Net income fee to related party | 210 | 48 | 700 | 104 | |||||||||||||
| Advisory fee to related party | 2,202 | 2,487 | 4,445 | 5,042 | |||||||||||||
| Total operating expenses | 20,408 | 19,123 | 39,863 | 37,417 | |||||||||||||
| Operating income | 440 | 1,279 | 1,458 | 3,220 | |||||||||||||
| Other income (expenses): | |||||||||||||||||
| Interest income (including $5,959 and $3,520 for the three months and $9,994 and $6,856 for the six months ended 2014 and 2013, respectively, from related parties) | 6,041 | 3,512 | 10,158 | 7,053 | |||||||||||||
| Other income | 232 | 149 | 411 | 2,685 | |||||||||||||
| Mortgage and loan interest (including $933 and $771 for the three months and $1,700 and $1,681 for the six months ended 2014 and 2013, respectively, from related parties) | (9,746 | ) | (9,285 | ) | (18,212 | ) | (18,720 | ) | |||||||||
| Deferred borrowing costs amortization | (343 | ) | 31 | (1,282 | ) | (2,429 | ) | ||||||||||
| Loan charges and prepayment penalties | - | (180 | ) | (1,582 | ) | (4,117 | ) | ||||||||||
| Loss on sale of investments | - | - | - | (8 | ) | ||||||||||||
| Earnings from unconsolidated subsidiaries and investees | (124 | ) | (25 | ) | (54 | ) | 188 | ||||||||||
| Litigation settlement | (86 | ) | 57 | 3,752 | 12 | ||||||||||||
| Total other expenses | (4,026 | ) | (5,741 | ) | (6,809 | ) | (15,336 | ) | |||||||||
| Loss before gain on land sales, non-controlling interest, and taxes | (3,586 | ) | (4,462 | ) | (5,351 | ) | (12,116 | ) | |||||||||
| Gain (loss) on land sales | (159 | ) | - | 594 | (35 | ) | |||||||||||
| Net loss from continuing operations before taxes | (3,745 | ) | (4,462 | ) | (4,757 | ) | (12,151 | ) | |||||||||
| Income tax benefit | 2,035 | 5,217 | 3,918 | 7,905 | |||||||||||||
| Net income (loss) from continuing operations | (1,710 | ) | 755 | (839 | ) | (4,246 | ) | ||||||||||
| Discontinued operations: | |||||||||||||||||
| Net loss from discontinued operations | (1,189 | ) | (3,168 | ) | (1,862 | ) | (2,716 | ) | |||||||||
| Gain on sale of real estate from discontinued operations | 7,003 | 18,074 | 13,057 | 25,301 | |||||||||||||
| Income tax expense from discontinued operations | (2,035 | ) | (5,217 | ) | (3,918 | ) | (7,905 | ) | |||||||||
| Net income from discontinued operations | 3,779 | 9,689 | 7,277 | 14,680 | |||||||||||||
| Net income | 2,069 | 10,444 | 6,438 | 10,434 | |||||||||||||
| Net income attributable to non-controlling interest | (551 | ) | (2,090 | ) | (1,370 | ) | (1,706 | ) | |||||||||
| Net income attributable to American Realty Investors, Inc. | 1,518 | 8,354 | 5,068 | 8,728 | |||||||||||||
| Preferred dividend requirement | (613 | ) | (613 | ) | (1,226 | ) | (1,226 | ) | |||||||||
| Net income applicable to common shares | $ | 905 | $ | 7,741 | $ | 3,842 | $ | 7,502 | |||||||||
| Earnings per share - basic | |||||||||||||||||
| Net loss from continuing operations | $ | (0.25 | ) | $ | (0.17 | ) | $ | (0.30 | ) | $ | (0.62 | ) | |||||
| Net income from discontinued operations | 0.33 | 0.84 | 0.63 | 1.27 | |||||||||||||
| Net income applicable to common shares | $ | 0.08 | $ | 0.67 | $ | 0.33 | $ | 0.65 | |||||||||
| Earnings per share - diluted | |||||||||||||||||
| Net loss from continuing operations | $ | (0.25 | ) | $ | (0.17 | ) | $ | (0.30 | ) | $ | (0.62 | ) | |||||
| Net income from discontinued operations | 0.33 | 0.84 | 0.63 | 1.27 | |||||||||||||
| Net income applicable to common shares | $ | 0.08 | $ | 0.67 | $ | 0.33 | $ | 0.65 | |||||||||
| Weighted average common shares used in computing earnings per share | 11,525,389 | 11,525,389 | 11,525,389 | 11,525,389 | |||||||||||||
| Weighted average common shares used in computing diluted earnings per share | 11,525,389 | 11,525,389 | 11,525,389 | 11,525,389 | |||||||||||||
| Amounts attributable to American Realty Investors, Inc. | |||||||||||||||||
| Net income (loss) from continuing operations | $ | (2,261 | ) | $ | (1,335 | ) | $ | (2,209 | ) | $ | (5,952 | ) | |||||
| Net income from discontinued operations | 3,779 | 9,689 | 7,277 | 14,680 | |||||||||||||
| Net income applicable to American Realty Investors, Inc. | $ | 1,518 | $ | 8,354 | $ | 5,068 | $ | 8,728 | |||||||||
| AMERICAN REALTY INVESTORS, INC. | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| (unaudited) | ||||||||||
| June 30, | December 31, | |||||||||
| 2014 | 2013 | |||||||||
| (dollars in thousands, except share and par value amounts) | ||||||||||
| Assets | ||||||||||
| Real estate, at cost | $ | 770,583 | $ | 799,698 | ||||||
| Real estate held for sale at cost, net of depreciation ($1,489 for 2014 and $2,390 for 2013) | 627 | 16,427 | ||||||||
| Real estate subject to sales contracts at cost, net of depreciation ($2,124 for 2014 and $1,949 for 2013) | 23,087 | 27,598 | ||||||||
| Less accumulated depreciation | (123,137 | ) | (143,429 | ) | ||||||
| Total real estate | 671,160 | 700,294 | ||||||||
| Notes and interest receivable | ||||||||||
| Performing (including $146,813 in 2014 and $145,754 in 2013 from related parties) | 154,410 | 153,275 | ||||||||
| Non-performing | 3,141 | 3,140 | ||||||||
| Less allowance for doubtful accounts (including $15,809 in 2014 and 2013 from related parties) | (19,537 | ) | (19,600 | ) | ||||||
| Total notes and interest receivable | 138,014 | 136,815 | ||||||||
| Cash and cash equivalents | 13,721 | 16,437 | ||||||||
| Restricted cash | 26,171 | 32,929 | ||||||||
| Investments in unconsolidated subsidiaries and investees | 3,833 | 3,789 | ||||||||
| Receivable from related party | 26,094 | 14,086 | ||||||||
| Other assets | 43,232 | 38,972 | ||||||||
| Total assets | $ | 922,225 | $ | 943,322 | ||||||
| Liabilities and Shareholders’ Equity | ||||||||||
| Liabilities: | ||||||||||
| Notes and interest payable | $ | 621,663 | $ | 618,930 | ||||||
| Notes related to assets held for sale | 3,006 | 17,100 | ||||||||
| Notes related to subject to sales contracts | 20,758 | 23,012 | ||||||||
| Deferred revenue (including $74,303 in 2014 and 2013 from sales to related parties) | 76,148 | 76,148 | ||||||||
| Accounts payable and other liabilities (including $16,522 in 2014 and $15,394 in 2013 to related parties) | 60,757 | 73,271 | ||||||||
| 782,332 | 808,461 | |||||||||
| Shareholders’ equity: | ||||||||||
| Preferred stock, Series A: $2.00 par value, authorized 15,000,000 shares, issued and outstanding 3,353,954 shares in 2014 and 2013 (liquidation preference $10 per share), including 900,000 shares in 2014 and 2013 held by ARL or subsidiaries. Series K: $2.00 par value, authorized, issued and outstanding 0 shares in 2014 and 135,000 shares in 2013, respectively (liquidation preference $22 per share) | 4,908 | 4,908 | ||||||||
| Common stock, $0.01 par value, authorized 100,000,000 shares; issued 11,941,174 shares and outstanding 11,525,389 shares in 2014 and 2013 | 115 | 115 | ||||||||
| Treasury stock at cost; 415,785 shares in 2014 and 2013 and 229,214 shares held by TCI (consolidated) as of 2014 and 2013 | (6,395 | ) | (6,395 | ) | ||||||
| Paid-in capital | 101,584 | 102,974 | ||||||||
| Retained earnings | (6,727 | ) | (11,795 | ) | ||||||
| Total American Realty Investors, Inc. shareholders' equity | 93,485 | 89,807 | ||||||||
| Non-controlling interest | 46,408 | 45,054 | ||||||||
| Total equity | 139,893 | 134,861 | ||||||||
| Total liabilities and equity | $ | 922,225 | $ | 943,322 | ||||||
Contacts:
Gene Bertcher,
800-400-6407
investor.relations@americanrealtyinvest.com
