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): August 14, 2019                                                              

 

 

AMERICAN REALTY INVESTORS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Nevada

 

001-15663

 

75-2847135

(State or other

jurisdiction of incorporation)

(Commission

File No.)

(I.R.S. Employer

Identification No.)

     
   

1603 LBJ Freeway, Suite 800

Dallas, Texas

75234
(Address of principal executive offices) (Zip Code)
       

 

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:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of Each Class

 

 

Trading Symbol

 

Name of Each Exchange

on which Registered

 

Common Stock, par value $0.01

 

ARL

 

New York Stock Exchange

 

 

 

 

1  
 

Section 2 - Financial Information

 

Item 2.02 Results of Operations and Financial Condition .

 

On August 14, 2019, American Realty Investors, Inc. (“ARL” or the “Company”) announced its operational results for the quarter ended June 30, 2019. 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 Statement and Exhibits .

 

(d)        Exhibits .

 

The following exhibit is furnished with this Report:

 

                     Exhibit No . Description

 

99.1*       Press release dated August 14, 2019 

 

_________________________

* Furnished herewith

2  
 

 

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: August 15, 2019

 

 

 

      AMERICAN REALTY INVESTORS, INC.
       
       
By: /s/ Daniel J. Moos
    Daniel J. Moos
    President and
    Chief Executive Officer

 

 

3  
 

Exhibit 99.1

 

NEWS RELEASE

 

FOR IMMEDIATE RELEASE

 

 

Contact:

American Realty Investors, Inc.

Investor Relations

Gene Bertcher (800) 400-6407 investor.relations@americanrealtyinvest.com

 

American Realty Investors, Inc. Reports First Quarter 2019 Results

 

Dallas (August 14,2019) — 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 sanie 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 (Refer to Note 2).

 

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.

4  
 

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 (Refer to Note 2) 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.americanrealtvinvest.com.

5  
 

 

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  

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

6  
 

AMERICAN REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

 

   

June 30,

2019

 

December 31,

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  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

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