DALLAS--(BUSINESS WIRE)--American Realty Investors, Inc. (NYSE:ARL), a Dallas-based real estate investment company, is reporting its Results of Operations for the quarter ended March 31, 2020. The Company’s primary real estate holdings consist of Transcontinental Realty Investors, Inc. (NYSE: TCI). Being that The Company’s operational activities are virtually limited to the ownership of TCI, this quarterly report will primarily discuss the operational activity of TCI. For the three months ended March 31, 2020, The Company reported a net income applicable to common shares of $2.9 million or $0.18 per diluted share, compared to a net loss applicable to common shares of $6.1 million or $0.38 per diluted share for the same period in 2019. This was driven by the overall strategic direction of both investing and expanding the core multi-family portfolio. In particular, as certain new multifamily development projects are completed, in which the Company has made significant new investments, it is expected that net income will again be positively impacted throughout the remainder of 2020. All new multifamily real estate projects within TCI’s future pipeline are progressing in various stages of development. Of significant note, the Company experienced a one-time expense as a requirement to pay Franchise Tax due to the Joint Venture Victory Abode Apartments (VAA). The Company does not anticipate this expense to reoccur in future periods.
With the current Coronavirus presenting a concern; we remain confident the underlying need for quality multi-family housing will remain strong. The Company bases this observation on occupancy trends across its portfolio. For the quarter ending March 31, 2020, same store occupancy was at 93.9% compared to 94.3% for the same period one year ago. To date, TCI’s existing portfolio has seen a significant increase in value. For FYE 2019, same store aggregate appraised value of TCI’s holdings was approximately $244.4 million. Whereas for FYE 2020, same store aggregate appraised value of TCI’s holdings was $298.7 million. This represents a $54.3 million or 22% increase in overall asset value year over year.
The Company believes that both the development of new projects and the historically low interest rate environment has positioned the Company along the strategic lines that it previously indicated. The Company has created a dynamic platform to continue its expansion in the multifamily sector. The ongoing plan is to continue to develop and acquire apartments in the geographic markets where demand exceeds supply.
Revenues
Rental and other property revenues were $11.9 million for the three months ended March 31, 2020, and 2019. For the quarter ended March 31, 2020, the Company generated revenues of $7.9 million and $4.0 million from its commercial and residential segments, respectively.
Expenses
Property operating expenses increased by $0.3 million to $6.3 million for the three months ended March 31, 2020 as compared to $6.0 million for the same period in 2019. The increase in property operating expenses is due to an increase in real estate taxes of approximately $0.5 million offset by an overall decrease in general property operating and maintenance expenses of $0.2 million.
Depreciation and amortization increased by $0.30 million to $3.4 million during the three months ended March 31, 2020 as compared to $3.1 million for the three months ended March 31, 2019. The increase in depreciation is due to an increase in our ownership of residential apartments to ten from nine for the same period a year ago which resulted in an increase in depreciation of $0.9 million from $0.7 million a year ago.
General and administrative expense was $2.8 million for the three months ended March 31, 2020, compared to $2.5 million for the same period in 2019. The increase of $0.3 million in general and administrative expenses was primarily due to increases professional fees of $0.1 million and legal fees of $0.3 million.
Franchise taxes and other expenses was $1.5 million for the three months ended March 31, 2020, compared to $0.125 million for the same period in 2019. The increase of $1.4 million in franchise taxes and other expenses was primarily due to increases in franchise taxes of $1.0 million.
Other income (expense)
Interest income was $5.8 million for the three months ended March 31, 2020, compared to $6.2 million for the same period in 2019. The decrease of $0.4 million was due to a decrease in interest of $0.4 on notes receivable from other related parties.
Other income decreased by $2.5 million to $1.2 million for the three months ended March 31, 2020, compared to $3.7 million for the same period in 2019. For the quarter ended March 31, 2020, the Company received property tax refunds of approximately $0.2 million, and recorded miscellaneous income of approximately $1.0 million. For the same period a year ago, the Company recognized $3.6 million gain associated with the sale of land by IOR to third parties.
Mortgage and loan interest expense was $9.6 million for the three months ended March 31, 2020, compared to $10.0 million for the same period in 2019.
Foreign currency transaction was a gain of $7.8 million for the three months ended March 31, 2020 as compared to a loss of $5.8 million for the same period in 2019. The unrealized gain was the result of the strengthening of the U.S. Dollar against the Israel Shekels due to perceived liquidity issues in Israel most likely as a result of the global pandemic outbreak. During the first quarter just ended, we paid $11.6 million in Series A bond principal and $7.3 million in interests payments to our Series A, B, and C bonds denominated in Israel Shekels.
Loss from unconsolidated investments was a net $0.26 million for the three months ended March 31, 2020 as compared to a net loss of $1.0 million for the three months ended March 31, 2019. The loss from unconsolidated investments during the first quarter just ended was driven primarily from our share in the losses reported by the VAA Joint Venture of $0.376 million.
Gain on land sales was $4.1 for the three months ended March 31, 2020, compared to $2.2 million for the same period in 2019. In the current period we sold approximately 18.7 acres of land for a sales price of $5.7 million which resulted in a gain of $4.1 million. For the same period in 2019, we sold approximately 22.3 acres of land for a sales price of $8.7 million which resulted in a gain of $2.2 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) | ||||||
| For the Three Months Ended March 31, | ||||||
2020 |
2019 |
|||||
(dollars in thousands, except per share amounts) |
||||||
| Revenues: | ||||||
| Rental and other property revenues (including $221 and $113 for the three months ended 2020 and 2019, respectively, from related parties) | $ |
11,918 |
$ |
11,929 |
||
| Expenses: | ||||||
| Property operating expenses (including $242 and $257 for the three months ended 2020 and 2019, respectively, from related parties) |
|
6,310 |
|
5,997 |
||
| Depreciation and amortization |
|
3,394 |
|
3,109 |
||
| General and administrative (including $1,133 and $1,597 for the three months ended 2020 and 2019, respectively, from related parties) |
|
2,795 |
|
2,480 |
||
| Franchise taxes and other expenses |
|
1,496 |
|
125 |
||
| Net income fee to related party |
|
86 |
|
100 |
||
| Advisory fee to related party |
|
2,287 |
|
1,853 |
||
| Total operating expenses |
|
16,368 |
|
13,664 |
||
| Net operating loss |
|
(4,450) |
|
(1,735) |
||
| Other income (expenses): | ||||||
| Interest income (including $5,031 and $5,881 for the three months ended 2020 and 2019, respectively, from related parties) |
|
5,754 |
|
6,153 |
||
| Other income |
|
1,212 |
|
3,667 |
||
| Mortgage and loan interest (including $1,915 and $2,307 for the three months ended 2020 and 2019, respectively, from related parties) |
|
(9,602) |
|
(9,968) |
||
| Foreign currency transaction (loss) gain |
|
7,843 |
|
(5,818) |
||
| Equity loss from VAA |
|
(376) |
|
(1,055) |
||
| Earnings from unconsolidated subsidiaries and investees |
|
116 |
|
58 |
||
| Total other income (expenses) |
|
4,947 |
|
(6,963) |
||
| Income (loss) before gain on land sales, non-controlling interest, and taxes |
|
497 |
|
(8,698) |
||
| Gain on land sales |
|
4,138 |
|
2,216 |
||
| Net income (loss) from continuing operations before taxes |
|
4,635 |
|
(6,482) |
||
| State income tax expense |
|
(247) |
|
- |
||
| Net income (loss) from continuing operations |
|
4,388 |
|
(6,482) |
||
| Net income (loss) |
|
4,388 |
|
(6,482) |
||
| Net (income) loss attributable to non-controlling interest |
|
(1,442) |
|
335 |
||
| Net income (loss) attributable to American Realty Investors, Inc. |
|
2,946 |
|
(6,147) |
||
| Net income (loss) applicable to common shares | $ |
2,946 |
$ |
(6,147) |
||
| (Loss) earnings per share - basic | ||||||
| Net income (loss) from continuing operations | $ |
0.27 |
$ |
(0.41) |
||
| Net income (loss) applicable to common shares | $ |
0.18 |
$ |
(0.38) |
||
| (Loss) earnings per share - diluted | ||||||
| Net income (loss) from continuing operations | $ |
0.27 |
$ |
(0.41) |
||
| Net income (loss) applicable to common shares | $ |
0.18 |
$ |
(0.38) |
||
| Weighted average common shares used in computing earnings per share |
|
15,997,076 |
|
15,997,076 |
||
| Weighted average common shares used in computing diluted earnings per share |
|
15,997,076 |
|
15,997,076 |
||
| Amounts attributable to American Realty Investors, Inc. | ||||||
| Net income (loss) from continuing operations | $ |
4,388 |
$ |
(6,482) |
||
| Net income (loss) applicable to American Realty Investors, Inc. | $ |
2,946 |
$ |
(6,147) |
||
| AMERICAN REALTY INVESTORS, INC. | ||||||
| CONSOLIDATED BALANCE SHEETS | ||||||
| March 31, 2020 | December 31, 2019 | |||||
| (Unaudited) | (Audited) | |||||
| (dollars in thousands, except share and par value amounts) | ||||||
Assets |
||||||
| Real estate, at cost | $ |
482,834 |
$ |
469,997 |
||
| Real estate subject to sales contracts at cost |
|
6,887 |
|
7,966 |
||
| Less accumulated depreciation |
|
(93,144) |
|
(90,173) |
||
| Total real estate |
|
396,577 |
|
387,790 |
||
| Notes and interest receivable (including $106,148 in 2020 and $105,524 in 2019 from related parties) |
|
170,918 |
|
169,299 |
||
| Less allowance for estimated losses (including $12,557 and $13,099 in 2020 and 2019 from related parties) |
|
(12,557) |
|
(13,099) |
||
| Total notes and interest receivable |
|
158,361 |
|
156,200 |
||
| Cash and cash equivalents |
|
39,946 |
|
51,228 |
||
| Restricted cash |
|
28,158 |
|
32,083 |
||
| Investment in VAA |
|
53,508 |
|
59,148 |
||
| Investment in other unconsolidated investees |
|
8,623 |
|
8,507 |
||
| Receivable from related party |
|
78,779 |
|
85,996 |
||
| Other assets |
|
51,119 |
|
49,689 |
||
| Total assets | $ |
815,071 |
$ |
830,641 |
||
Liabilities and Shareholders’ Equity |
||||||
| Liabilities: | ||||||
| Notes and interest payable | $ |
260,969 |
$ |
254,873 |
||
| Bond and interest payable |
|
207,832 |
|
229,722 |
||
| Deferred revenue (including $24,762 in 2020 and 2019 to related parties) |
|
24,762 |
|
24,762 |
||
| Accounts payable and other liabilities (including $12,069 in 2020 and $11,817 in 2019 to related parties) |
|
20,604 |
|
24,768 |
||
| Total liabilities |
|
514,167 |
|
534,125 |
||
| Shareholders’ equity: | ||||||
| Preferred stock, Series A: $2.00 par value, authorized 15,000,000 shares, issued 614 and outstanding 1,800,614 in 2020 and 2019 (liquidation preference $10 per share), including 1,800,000 shares held by ARL and its subsidiaries in 2020 and 2019. |
|
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 2020 and 2019, including 140,000 shares held by TCI (consolidated) in 2020 and 2019. |
|
164 |
|
164 |
||
| Treasury stock at cost; 415,785 shares in 2020 and 2019, and 140,000 shares held by TCI (consolidated) as of 2020 and 2019. |
|
(6,395) |
|
(6,395) |
||
| Paid-in capital |
|
82,017 |
|
82,017 |
||
| Retained earnings |
|
166,654 |
|
163,708 |
||
| Total American Realty Investors, Inc. shareholders' equity |
|
242,445 |
|
239,499 |
||
| Non-controlling interest |
|
58,459 |
|
57,017 |
||
| Total shareholders' equity |
|
300,904 |
|
296,516 |
||
| Total liabilities and shareholders' equity | $ |
815,071 |
$ |
830,641 |
||
