American Realty Investors, Inc. (NYSE:ARL), a Dallas-based real
estate investment company, today reported results of operations for
the quarter ended September 30, 2019. For the three months ended
September 30, 2019, we reported a net loss applicable to common
shares of $7.6 million or ($0.47) per diluted loss per share
compared to a net income applicable to common shares of $20.1
million or $1.21 per diluted loss per share for the same period
ended 2018.
Though the Company reported a net income loss, this is driven by
the overall strategic direction of expanding the core business. As
certain new multi-family development projects are completed, which
the Company has invested in, it is expected that net income should
be positively impacted.
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 continuing growth and enhancing the capabilities
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 will 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 $11.9 million for the
three months ended September 30, 2019, compared to $33.5 million
for the same period in 2018. The $21.6 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-eight 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.
Expenses
Property operating expenses decreased by $10.0 million to $5.9
million for the three months ended September 30, 2019 as compared
to $15.9 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
$1.9 million, real estate taxes of approximately $3.8 million,
management fees paid to third parties of $0.8 million, and other
general property operating and maintenance expenses of $3.5
million.
Depreciation and amortization decreased by $3.5 million to $3.4
million during the three months ended September 30, 2019 as
compared to $6.9 million for the three months ended September 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 $2.7 million for the
three months ended September 30, 2019 and $2.1 million for the same
period in 2018. The increase of $0.6 million in general and
administrative expenses is primarily due to increases in fees paid
to our Advisors of $0.6 million.
Other income (expense)
Interest income was $6.9 million for the three months ended
September 30, 2019, compared to $5.7 million for the same period in
2018. The increase of $1.2 million was due to an increase of $1.2
million in interest on the receivables owed by our Advisors and
related parties.
Other income was $1.3 million for the three months ended
September 30, 2019, compared to $18.8 million for the same period
in 2018. The decrease of $17.5 million was primarily due to the
recognition of gain from deferred income of $17.6 million
associated with the sale of assets during the three months ended
September 30, 2018 as opposed to $1.2 million of gain recognized
from deferred income related to the sale of assets during the three
months ended September 30, 2019.
Mortgage and loan interest expense was $10.4 million for the
three months ended September 30, 2019 as compared to $17.4 million
for the same period in 2018. The decrease of $7.0 million is
primarily 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 $5.2 million for the
three months ended September 30, 2019 as compared to a loss of $1.3
million for the same period in 2018. The increase of $3.9 million
is due to the unfavorable exchange rate between the Israel Shekels
and the U.S. Dollar related to our Israel Shekels denominated bonds
and the increase in our bonds obligations during the three months
ended September 30, 2019 as compared to the same period a year
ago.
Loss on debt extinguishment was $5.2 million with no comparable
amount in 2018. The loss is the result of debt borrowing costs
write-off of $1.4 million and prepayment penalty of approximately
$3.9 million associated with the payment of $41.5 million of
mortgage debt for one of our commercial buildings.
Loss from unconsolidated investments was a net of $0.08 million
for the three months ended September 30, 2019 as compared to
earnings of $0.2 million for the three months ended September 30,
2018. The loss from unconsolidated investments during the third
quarter just ended was driven primarily from our share in the
losses reported by our VAA Joint Venture of $0.19 million (Refer to
Note 2) offset by earnings from other unconsolidated investees of
$0.11 million.
Gain on land sales was $5.1 for the three months ended September
30, 2019 as compared to a gain of $12.2 million for the same period
in 2018. During the three months ended September 30, 2019, we sold
16.2 acres of land for an aggregate sales price of $7.0 million and
recognized a gain of $5.1 million. For the same period a year ago,
we sold approximately 50 acres of land for an aggregate sales price
of $35.5 million and recognized a gain of $12.2 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.
AMERICAN REALTY INVESTORS, INC. CONSOLIDATED STATEMENTS
OF OPERATIONS (unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
Revenues: Rental and other property revenues (including $212
and $207 for the three months and $527 and $623 for the nine months
ended 2019 and 2018, respectively, from related parties)
$
11,943
$
33,409
$
35,712
$
96,099
Expenses: Property operating expenses (including $237
and $231 for the three months ended and $741 and $689 for the nine
months ended 2019 and 2018, respectively, from related parties)
5,883
15,945
19,203
45,919
Depreciation and amortization
3,416
6,873
9,964
19,768
General and administrative (including $1,002 and $1,197 for the
three months ended and $3,680 and $3,634 for the nine months ended
2019 and 2018, respectively, from related parties)
2,669
2,062
9,401
7,357
Net income fee to related party
83
383
273
489
Advisory fee to related party
1,758
2,936
4,849
8,821
Total operating expenses
13,809
28,199
43,690
82,354
Net operating (loss) income
(1,866
)
5,210
(7,978
)
13,745
Other income (expenses): Interest income (including $6,240
and $3,275 for the three months ended and $18,328 and $8,554 for
the nine months ended 2019 and 2018, respectively, from related
parties)
6,856
5,710
19,514
15,701
Other income
1,288
18,750
8,319
28,188
Mortgage and loan interest (including $2,402 and $2,072 for the
three months ended and $7,094 and $5,780 for the nine months ended
2019 and 2018, respectively, from related parties)
(10,420
)
(17,422
)
(29,796
)
(49,053
)
Foreign currency transaction (loss) gain
(5,153
)
(1,288
)
(13,296
)
6,357
Loss on extinguishment of debt
(5,219
)
-
(5,219
)
-
Equity loss from VAA
(189
)
-
(1,480
)
-
Earnings from unconsolidated subsidiaries and investees
114
205
345
802
Total other (expenses) income
(12,723
)
5,955
(21,613
)
1,995
(Loss) income before gain on land sales, non-controlling interest,
and taxes
(14,589
)
11,165
(29,591
)
15,740
Loss on sale of income producing properties
-
-
(80
)
-
Gain on land sales
5,139
12,243
9,872
13,578
Net (loss) income from continuing operations before taxes
(9,450
)
23,408
(19,799
)
29,318
Income tax expense
-
(792
)
-
(792
)
Net (loss) income from continuing operations
(9,450
)
22,616
(19,799
)
28,526
Net (loss) income
(9,450
)
22,616
(19,799
)
28,526
Net (income) loss attributable to non-controlling interest
1,879
(2,265
)
3,303
(2,981
)
Net (loss) income attributable to American Realty Investors, Inc.
(7,571
)
20,351
(16,496
)
25,545
Preferred dividend requirement
-
(225
)
-
(675
)
Net (loss) income applicable to common shares
$
(7,571
)
$
20,126
$
(16,496
)
$
24,870
(Loss) earnings per share - basic Net (loss) income from
continuing operations
$
(0.59
)
$
1.46
$
(1.24
)
$
1.84
Net (loss) income applicable to common shares
$
(0.47
)
$
1.30
$
(1.03
)
$
1.60
(Loss) earnings per share - diluted Net (loss) income
from continuing operations
$
(0.59
)
$
1.36
$
(1.24
)
$
1.72
Net (loss) income applicable to common shares
$
(0.47
)
$
1.21
$
(1.03
)
$
1.50
Weighted average common shares used in computing earnings per share
15,997,076
15,514,360
15,997,076
15,514,360
Weighted average common shares used in computing diluted earnings
per share
15,997,076
16,598,942
15,997,076
16,598,942
Amounts attributable to American Realty Investors,
Inc. Net (loss) income from continuing operations
$
(9,450
)
$
22,616
$
(19,799
)
$
28,526
Net (loss) income applicable to American Realty Investors, Inc.
$
(7,571
)
$
20,351
$
(16,496
)
$
25,545
AMERICAN REALTY INVESTORS,
INC.
CONSOLIDATED BALANCE
SHEETS
September 30,
December 31,
2019
2018
(unaudited)
(audited)
(dollars in thousands, except
share and par value amounts)
Assets
Real estate, at cost
$
464,452
$
455,993
Real estate subject to sales contracts at cost
1,626
3,149
Less accumulated depreciation
(86,088
)
(78,099
)
Total real estate
379,990
381,043
Notes and interest receivable (including $120,334 in 2019
and $105,803 in 2018 from related parties)
172,468
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
158,199
126,058
Cash and cash equivalents
63,075
36,428
Restricted cash
36,865
70,187
Investment in VAA
64,962
68,399
Investment in other unconsolidated investees
7,947
7,602
Receivable from related parties
71,147
70,377
Other assets
50,177
66,055
Total assets
$
832,362
$
826,149
Liabilities and Shareholders’
Equity
Liabilities: Notes and interest payable
$
250,725
$
286,968
Bond and interest payable
223,433
158,574
Deferred revenue (including $28,847 in 2019 and $33,904 in 2018 to
related parties)
28,847
33,904
Accounts payable and other liabilities (including $11,589 in 2019
and $9,984 in 2018 to related parties)
30,896
25,576
Total liabilities
533,901
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
82,018
84,885
Retained earnings
163,170
179,666
Total American Realty Investors, Inc. shareholders' equity
238,962
258,325
Non-controlling interest
59,499
62,802
Total shareholders' equity
298,461
321,127
Total liabilities and shareholders' equity
$
832,362
$
826,149
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191114005768/en/
American Realty Investors, Inc. Investor Relations
Daniel Moos (800) 400-6407
investor.relations@americanrealtyinvest.com
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