UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
Date of Report (Date of earliest event reported): May 13, 2015
AMERICAN REALTY INVESTORS, INC.
(Exact Name of Registrant as Specified in its Charter)
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Nevada
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001-15663
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75-2847135
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(State or other
jurisdiction of incorporation)
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(Commission
File No.)
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(I.R.S. Employer
Identification No.)
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1603 LBJ Freeway, Suite 800
Dallas, Texas
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75234
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code 469-522-4200
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Section 2 – Financial Information
Item 2.02. Results of Operations and Financial Condition
On May 13, 2015, American Realty Investors, Inc. (“ARL” or the “Company”) announced its operational results for the quarter ended March 31, 2015. A copy of the announcement is attached as Exhibit “99.1.”
The information furnished pursuant to Item 2.02 in this Form 8-K, including Exhibit “99.1,” attached hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, unless we specifically incorporate it by reference in a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934. We undertake no duty or obligation to publicly update or revise the information furnished pursuant to Item 2.02 of this Current Report on Form 8-K.
Section 9 – Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits
The following exhibit is furnished with this Report:
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Exhibit
Designation
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Description of Exhibit
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99.1*
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Press Release dated May 13, 2015
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_____________________
*Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned, hereunto duly authorized.
| Dated: May 15, 2015 |
AMERICAN REALTY INVESTORS, INC.
By: /s/ Gene S. Bertcher
Gene S. Bertcher, Executive Vice
President and Chief Financial Officer
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EXHIBIT "99.1"
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NEWS RELEASE
FOR IMMEDIATE RELEASE
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Contact:
American Realty Investors, Inc.
Investor Relations
Gene Bertcher (800) 400-6407
Investor.relations@americanrealtyinvest.com
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American Realty Investors, Inc. Reports First Quarter 2015 Results
Dallas (May 13, 2015) - 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, 2015. For the three months ended March 31, 2015, the Company reported net income applicable to common shares of $3.0 million or $0.17 per diluted earnings per share, as compared to net income applicable to common shares of $2.9 million or $0.25 per diluted earnings per share for the same period ended 2014.
The Company continues to demonstrate our unwavering commitment to fortify our portfolio and streamline our operational activity, while at the same time maintaining our commitment to creating value. We are pleased that we are seeing 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.
Management's efforts to enhance the value of our overall portfolio has resulted in the continuing improvement in the Company's results of operations. Our apartment portfolio continues to thrive in the current economic conditions with occupancies averaging over 95%. We continue to work aggressively to attract new tenants and strive for continuous improvement of our properties in order to maintain our existing tenants.
Our ability to take advantage of lower-interest rate mortgages available has reduced our monthly obligations and increased cash flow within our multifamily portfolio.
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.
Rental and other property revenues were $23.2 million for the three months ended March 31, 2015. This represents an increase of $4.0 million, as compared to the prior period revenues of $19.2 million. This change, by segment, is an increase in the apartment portfolio of $1.6 million, and an increase in the commercial portfolio of $2.4 million. Within the apartment portfolio there was an increase of $1.3 million in the acquired property portfolio and an increase of $0.3 million in the same property portfolio. Within the commercial portfolio, there was an increase of $1.5 million in the acquired property portfolio and increase of $0.9 million in the same store properties. 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 $11.6 million for the three months ended March 31, 2015. This represents an increase of $1.7 million, as compared to the prior period operating expenses of $9.9 million. This change, by segment, is an increase in the apartment portfolio of $0.6 million, and an increase in the commercial portfolio of $1.1 million. Within the apartment portfolio there was an increase of $0.5 million in the acquired properties portfolio and an increase of $0.1 million in the same property portfolio. Within the commercial portfolio, there was an increase of $1.0 million in the acquired properties portfolio and an increase of $0.1 million in the same store properties.
Interest income was $5.2 million for the three months ended March 31, 2015. This represents an increase of $1.1 million, as compared to the prior year income of $4.1 million. The increase was primarily due to additional notes receivable acquired in prior periods.
Other income was $4.1 million for the three months ended March 31, 2015. This represents an increase of $3.9 million, as compared to the prior period income of $0.2 million. The majority of this increase was due to a settlement agreement on one of the commercial properties whereby upon payoff of the mortgage, we received a debt forgiveness of $3.9 million.
Mortgage and loan interest expense was $9.2 million for the three months ended March 31, 2015. This represents an increase of $1.1 million, as compared to the prior period expense of $8.1 million. The majority of this increase is in the other portfolio and is due to the securing of a new loan subsequent to the prior period.
Litigation settlement expenses were $0.07 million for the three months ended March 31, 2015, compared to $3.8 million of income in 2014 from settlements that occurred in that period. This increase is the result of guarantor settlements on various real estate properties in the prior period, therefore avoiding future litigation.
Gain on land sales increased for the three months ended March 31, 2015, as compared to the prior period. In the current period, we sold 33.39 acres of land in two transactions for a sales price of $7.3 million and recorded a gain of $2.9 million. In the prior period, we sold 6.31 acres of land in one transaction for a sales price of $1.6 million and recorded a gain of $0.8 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.
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AMERICAN REALTY INVESTORS, INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(unaudited)
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For the Three Months Ended
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March 31,
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2015
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2014
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(dollars in thousands, except per share amounts)
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Revenues:
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Rental and other property revenues (including $170 and $175 for the three months ended
2015 and 2014, respectively, from related parties)
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$ |
23,156 |
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$ |
19,159 |
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Expenses:
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Property operating expenses (including $162 and $155 for the three months ended 2015 and
2014, respectively, from related parties)
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11,668 |
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9,928 |
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Depreciation and amortization
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4,704 |
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4,313 |
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General and administrative (including $1,007 and $918 for the three months ended 2015 and
2014, respectively, from related parties)
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2,201 |
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1,984 |
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Net income fee to related party
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290 |
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490 |
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Advisory fee to related party
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2,292 |
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2,242 |
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Total operating expenses
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21,155 |
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18,957 |
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Net operating income
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2,001 |
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202 |
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Other income (expenses):
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Interest income (including $4,897 and $4,036 for the three months ended 2015 and 2014,
respectively, from related parties)
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5,237 |
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4,117 |
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Other income
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4,097 |
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173 |
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Mortgage and loan interest (including $864 and $798 for the three months ended 2015 and
2014, respectively, from related parties)
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(9,193 |
) |
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(8,119 |
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Deferred borrowing costs amortization
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(601 |
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(938 |
) |
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Loan charges and prepayment penalties
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(1,850 |
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(1,582 |
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Earnings from unconsolidated subsidiaries and investees
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45 |
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70 |
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Litigation settlement
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(73 |
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3,839 |
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Total other expenses
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(2,338 |
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(2,440 |
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Loss before gain on land sales, non-controlling interest, and taxes
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(337 |
) |
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(2,238 |
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Gain on land sales
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2,876 |
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753 |
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Net income (loss) from continuing operations before taxes
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2,539 |
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(1,485 |
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Income tax benefit
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103 |
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2,049 |
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Net income from continuing operations
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2,642 |
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564 |
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Discontinued operations:
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Net income (loss) from discontinued operations
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293 |
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(199 |
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Gain on sale of real estate from discontinued operations
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- |
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6,053 |
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Income tax expense from discontinued operations
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(103 |
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(2,049 |
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Net income from discontinued operations
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190 |
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|
3,805 |
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Net income
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|
2,832 |
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|
4,369 |
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Net (income) loss attributable to non-controlling interest
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508 |
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(819 |
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Net income attributable to American Realty Investors, Inc.
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3,340 |
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3,550 |
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Preferred dividend requirement
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(390 |
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(613 |
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Net income applicable to common shares
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$ |
2,950 |
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$ |
2,937 |
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Earnings per share - basic
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Net income (loss) from continuing operations
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$ |
0.20 |
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$ |
(0.08 |
) |
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Net income from discontinued operations
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0.01 |
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0.33 |
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Net income applicable to common shares
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$ |
0.21 |
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$ |
0.25 |
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Earnings per share - diluted
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Net income (loss) from continuing operations
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$ |
0.16 |
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$ |
(0.08 |
) |
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Net income from discontinued operations
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0.01 |
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0.33 |
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Net income applicable to common shares
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$ |
0.17 |
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$ |
0.25 |
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|
|
|
|
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Weighted average common shares used in computing earnings per share
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14,027,619 |
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11,525,389 |
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Weighted average common shares used in computing diluted earnings per share
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17,426,707 |
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11,525,389 |
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|
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|
|
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Amounts attributable to American Realty Investors, Inc.
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|
|
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Net income (loss) from continuing operations
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$ |
3,150 |
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|
$ |
(255 |
) |
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Net income from discontinued operations
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|
190 |
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|
3,805 |
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Net income applicable to American Realty Investors, Inc.
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$ |
3,340 |
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$ |
3,550 |
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AMERICAN REALTY INVESTORS, INC.
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CONSOLIDATED BALANCE SHEETS
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(unaudited)
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|
|
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March 31,
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December 31,
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2015
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2014
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(dollars in thousands, except
share and par value amounts)
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Assets
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Real estate, at cost
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$ |
811,359 |
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$ |
810,214 |
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Real estate subject to sales contracts at cost, net of depreciation ($2,387 for 2015 and $2,300 for 2014)
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19,047 |
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19,026 |
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Less accumulated depreciation
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(133,800 |
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(129,477 |
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Total real estate
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696,606 |
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699,763 |
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Notes and interest receivable
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|
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Performing (including $136,841 in 2015 and $139,466 in 2014 from related parties)
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153,271 |
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|
149,484 |
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Non-performing
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|
3,171 |
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|
3,161 |
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Less allowance for doubtful accounts (including $15,537 in 2015 and 2014 from related parties)
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(18,279 |
) |
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|
(18,279 |
) |
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Total notes and interest receivable
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|
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138,163 |
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|
|
134,366 |
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Cash and cash equivalents
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19,700 |
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|
|
12,299 |
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Restricted cash
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|
36,135 |
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|
49,266 |
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Investments in unconsolidated subsidiaries and investees
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4,462 |
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|
4,279 |
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Receivable from related party
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|
5,409 |
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21,414 |
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Other assets
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45,213 |
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|
|
44,111 |
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Total assets
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$ |
945,688 |
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$ |
965,498 |
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|
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Liabilities and Shareholders’ Equity
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Liabilities:
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Notes and interest payable
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$ |
621,596 |
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$ |
638,891 |
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Notes related to assets held for sale
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1,227 |
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|
1,552 |
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Notes related to subject to sales contracts
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|
18,434 |
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|
18,616 |
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Deferred revenue (including $72,564 in 2015 and 2014 from sales to related parties)
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|
74,409 |
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|
74,409 |
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Accounts payable and other liabilities (including $11,412 in 2015 and $11,024 in 2014 to related
parties)
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|
|
48,317 |
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|
|
52,442 |
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| |
|
|
763,983 |
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|
|
785,910 |
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| |
|
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|
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Shareholders’ equity:
|
|
|
|
|
|
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|
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Preferred stock, Series A: $2.00 par value, authorized 15,000,000 shares, issued and outstanding
2,461,252 shares in 2015 and 2014 (liquidation preference $10 per share), including 900,000 shares
in 2015 and 2014 held by ARL or subsidiaries.
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|
|
3,126 |
|
|
|
3,126 |
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Common stock, $0.01 par value, authorized 100,000,000 shares; issued 14,443,404 shares in 2015
and 2014; outstanding 14,027,619 shares in 2015 and 2014; including 140,000 shares held by TCI
(consolidated) in 2015 and 2014.
|
|
|
141 |
|
|
|
141 |
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|
Treasury stock at cost; 415,785 shares in 2015 and 2014
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|
|
(6,395 |
) |
|
|
(6,395 |
) |
|
Paid-in capital
|
|
|
107,652 |
|
|
|
108,378 |
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|
Retained earnings
|
|
|
22,430 |
|
|
|
19,090 |
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Total American Realty Investors, Inc. shareholders' equity
|
|
|
126,954 |
|
|
|
124,340 |
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Non-controlling interest
|
|
|
54,751 |
|
|
|
55,248 |
|
|
Total shareholders' equity
|
|
|
181,705 |
|
|
|
179,588 |
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Total liabilities and shareholders' equity
|
|
$ |
945,688 |
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|
$ |
965,498 |
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