ARL American Realty Investors Inc

American Realty Investors, Inc. (NYSE:ARL), a Dallas-based real estate investment company, reported results of operations for the second quarter ended June 30, 2016. For the three months ended June 30, 2016, the Company reported net income applicable to common shares of $2.4 million or $0.16 earnings per diluted share, as compared to net income applicable to common shares of $0.9 million or $0.05 earnings per diluted share for the same period in 2015.

“The Company’s strategic posture of maintaining a strong focus on our multi-family portfolio has created valuable results. We are committed to solidifying the portfolio and paying very close attention to all operational details, while at the same time maintaining our commitment to creating value. We believe our second quarter 2016 operating results, combined with our recent acquisitions, demonstrates yet another quarter of stabilized performance for the Company. We believe the portfolio is well positioned to deliver solid financial returns for the remainder of 2016,” said Danny Moos, the Company’s Chief Executive Officer and President. “We are pleased that we are seeing continued improvements in our operations from these endeavors and will continue to adapt to market challenges with an eye on both near term economic challenges and long-term prospects as the real estate market improves.”

Rental and other property revenues were $30.8 million for the three months ended June 30, 2016. This represents an increase of $6.6 million compared to the prior period revenues of $24.2 million. The change by segment is an increase in the apartment portfolio of approximately $4.6 million and an increase in the commercial portfolio of $2.0 million. During the three months ended June 30, 2016, we recorded $2.5 million rental revenue for six apartment communities purchased since June 30, 2015 and had a decrease in rental revenue of $0.6 million for two apartment communities sold since June 30, 2015, for a net increase of $1.9 million. In addition, we purchased seven apartment communities in the second quarter of 2015, which produced rental revenue of $3.1 million and $1.3 million during the three months ended June 30, 2016 and 2015, respectively, for a net increase of $1.8 million. The $2.0 million increase in revenues for the commercial portfolio was primarily due to the acquisition of a commercial building in Houston, Texas late in the second quarter of 2015.

Property operating expenses were $15.2 million for the three months ended June 30, 2016. This represents an increase of $3.9 million compared to the prior period operating expenses of $11.3 million. The change by segment is an increase in the apartment portfolio of approximately $2.4 million and an increase in the commercial portfolio of $1.5 million. The primary reason for the increase in property operating expenses for the Company’s apartment portfolio was the purchase of six communities with 1,144 units, net of two communities sold with 360 units since June 30, 2015, for a net increase of 784 units. In addition, we purchased seven apartment communities during the second quarter of 2015, which have 1,261 units. Property operating expenses for our commercial portfolio increased $1.5 million primarily due to the acquisition of an office building in Houston, Texas late in the second quarter of 2015.

Depreciation and amortization expense was approximately $5.8 million for the three months ended June 30, 2016 for an increase of $0.7 million as compared to the prior period expense of $5.1 million. The increase is primarily due to the growth in our apartment portfolio over the past 15 months for a net increase of 2,045 units.

Mortgage and loan interest expense was $14.0 million for the three months ended June 30, 2016. This represents an increase of $4.2 million compared to the prior period expense of $9.8 million. The change by segment was an increase of $2.7 million in the apartment portfolio due to acquisitions and an increase of $1.9 million in the other portfolio primarily due to securing a new mezzanine debt obligation in June 2015. These increases were partially offset by a decrease in the land portfolio of $0.4 million due to the transfer of mortgage obligations related to land sold.

Gain on sale of income-producing properties was $5.2 million for the three months ended June 30, 2016. During 2016, ARL sold one apartment community located in Irving, Texas to an independent third party for a total sales price of $8.1 million, which resulted in a gain of $5.2 million. There were no sales of income-producing properties during the three months ended June 30, 2015.

Gain on land sales was $1.7 million for the three months ended June 30, 2016 compared to $3.0 million for the three months ended June 30, 2015. In the current period, we sold 12.2 acres of land for a total sales price of $3.1 million and recorded a gain of $1.7 million. In 2015, we sold 9.7 acres of land for a total sales price of $1.9 million and recorded a gain of $1.2 million. In addition, we recognized a deferred gain of $1.8 million in 2015 on land sold in a 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)   Three Months Ended June 30, Six Months Ended June 30,   2016     2015     2016     2015   (dollars in thousands, except per share amounts) Revenues: Rental and other property revenues (including $174 and $173 for the three months and $347 and $343 for the six months ended 2016 and 2015, respectively, from related parties) $ 30,834 $ 24,241 $ 60,039 $ 47,397   Expenses: Property operating expenses (including $231 and $187 for the three months and $441 and $349 for the six months ended 2016 and 2015, respectively, from related parties) 15,191 11,301 30,407 22,969 Depreciation and amortization 5,868 5,137 11,698 9,841 General and administrative (including $942 and $912 for the three months and $1,860 and $1,920 for the six months ended 2016 and 2015, respectively, from related parties) 2,412 1,596 4,437 3,798 Net income fee to related party 54 45 126 335 Advisory fee to related party   2,687     2,309     5,425     4,601   Total operating expenses   26,212     20,388     52,093     41,544   Net operating income 4,622 3,853 7,946 5,853   Other income (expenses): Interest income (including $4,504 and $4,246 for the three months and $10,029 and $9,113 for the six months ended 2016 and 2015, respectively, from related parties) 4,788 4,535 10,079 9,772 Other income 902 14 1,200 4,111 Mortgage and loan interest (including $1,355 and $920 for the three months and $2,447 and $1,815 for the six months ended 2016 and 2015, respectively, from related parties) (13,975 ) (9,794 ) (28,189 ) (21,439 ) Earnings from unconsolidated subsidiaries and investees 129 151 284 196 Litigation settlement (expense)   -     (45 )   -       (117 ) Total other expenses   (8,156 )   (5,139 )   (16,626 )   (7,477 ) Loss before gains on sale of income producing properties and land, non-controlling interest, and taxes (3,534 ) (1,286 ) (8,680 ) (1,624 ) Gain on sale of income producing properties 5,168 - 4,925 - Gain on land sales   1,719       3,027       3,370       5,903   Net income (loss) from continuing operations before taxes 3,353 1,741 (385 ) 4,279 Income tax benefit (expense)   -     (12 )   1     91   Net income (loss) from continuing operations 3,353 1,729 (384 ) 4,370 Discontinued operations: Net income (loss) from discontinued operations - (34 ) 3 260 Income tax benefit (expense) from discontinued operations   -     12     (1 )     (91 ) Net income (loss) from discontinued operations   -     (22 )   2       169   Net income (loss) 3,353 1,707 (382 ) 4,539 Net income attributable to non-controlling interest   (864 )   (540 )   (334 )     (32 ) Net income (loss) attributable to American Realty Investors, Inc. 2,489 1,167 (716 ) 4,507 Preferred dividend requirement   (53 )   (275 )   (550 )   (665 ) Net income (loss) applicable to common shares $ 2,436   $ 892   $ (1,266 ) $ 3,842     Earnings per share - basic Net income (loss) from continuing operations $ 0.16 $ 0.06 $ (0.08 ) $ 0.25 Net income from discontinued operations   -     -     -     0.01   Net income applicable to common shares $ 0.16   $ 0.06   $ (0.08 ) $ 0.26     Earnings per share - diluted Net income (loss) from continuing operations $ 0.16 $ 0.05 $ (0.08 ) $ 0.21 Net income (loss) from discontinued operations   -     -     -     0.01   Net income applicable to common shares $ 0.16   $ 0.05   $ (0.08 ) $ 0.22     Weighted average common shares used in computing earnings per share 15,514,360 15,367,320 15,514,360 14,701,170 Weighted average common shares used in computing diluted earnings per share 15,514,360 17,844,339 15,514,360 17,178,190     Amounts attributable to American Realty Investors, Inc. Net income (loss) from continuing operations $ 2,489 $ 1,189 $ (718 ) $ 4,338 Net income (loss) from discontinued operations   -     (22 )   2     169   Net income applicable to American Realty Investors, Inc. $ 2,489   $ 1,167   $ (716 ) $ 4,507           AMERICAN REALTY INVESTORS, INC. CONSOLIDATED BALANCE SHEETS     June 30, December 31,   2016     2015   (unaudited) (dollars in thousands, except share and par value amounts) Assets Real estate, at cost $ 1,012,240 $ 954,390 Real estate subject to sales contracts at cost, net of depreciation 49,155 49,155 Less accumulated depreciation   (159,991 )   (150,038 ) Total real estate 901,404 853,507 Notes and interest receivable Performing (including $128,548 in 2016 and $125,915 in 2015 from related parties) 140,891 137,280 Less allowance for doubtful accounts (including $15,537 in 2016 and 2015 from related parties)   (17,037 )   (17,037 ) Total notes and interest receivable 123,854 120,243 Cash and cash equivalents 19,152 15,232 Restricted cash 30,188 45,711 Investments in unconsolidated subsidiaries and investees 5,868 8,365 Receivable from related party 6,385 28,147 Other assets   44,824     46,163   Total assets $ 1,131,675   $ 1,117,368     Liabilities and Shareholders’ Equity Liabilities: Notes and interest payable $ 820,921 $ 797,962 Notes related to subject to sales contracts 376 376 Notes related to assets subject to sales contract 6,072 6,422 Deferred revenue (including $70,915 in 2016 and $70,892 in 2015 from sales to related parties) 91,360 91,336 Accounts payable and other liabilities (including $10,112 in 2016 and $10,013 in 2015 to related parties)   36,989     44,383   955,718 940,479   Shareholders’ equity: Preferred stock, Series A: $2.00 par value, authorized 15,000,000 shares, issued and outstanding 2,000,614 shares in 2016 and 2015 (liquidation preference $10 per share), including 900,000 shares in 2016 and 2015 held by ARL or subsidiaries. 2,205 2,205 Common stock, $0.01 par value, authorized 100,000,000 shares; issued 15,930,145 and 14,443,404 shares; outstanding 15,514,360 and 14,027,619 shares in 2016 and 2015, respectively; including 140,000 shares held by TCI (consolidated) in 2016 and 2015. 156 156 Treasury stock at cost; 415,785 shares in 2016 and 2015, and 140,000 shares held by TCI (consolidated) as of 2016 and 2015 (6,395 ) (6,395 ) Paid-in capital 109,311 109,861 Retained earnings   16,414     17,130   Total American Realty Investors, Inc. shareholders' equity 121,691 122,957 Non-controlling interest   54,266     53,932   Total shareholders' equity   175,957     176,889   Total liabilities and shareholders' equity $ 1,131,675   $ 1,117,368  

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