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American Realty Investors, Inc. Reports Second Quarter 2009 Results
Business Wire
Aug 14, 2009
American Realty Investors, Inc. (NYSE:ARL), a Dallas-based real estate investment company, reported a net loss for the six months ended June 30, 2009. ARL announced today that the Company reported a net loss applicable to common shares of ($36.1) million or $(3.22) per diluted earnings per share for the six months ended June 30, 2009, as compared to a net income applicable to common shares of $46.7 million or $4.46 per diluted earnings per share which includes gain on sale of real estate from discontinued operations of $115.1 million for the same period ended 2008.
In addition, the Company reported a net loss applicable to common shares for the three months ended June 30, 2009. ARL reported a net loss applicable to common shares of ($28.9) million or ($2.57) per diluted earnings per share, as compared to a net income applicable to common shares of ($13.1) million or ($1.25) per diluted earnings per share for the same period ended 2008.
Comparison of the three months ended June 30, 2009 as compared to the same period ended 2008
Rental and other property revenues increased by $1.0 million as compared to the prior year period which by segment was an increase in the apartment portfolio of $2.9 million, offset by a decrease in the commercial portfolio of $0.2 million, a decrease in the hotel portfolio of $0.5 million, a decrease in the land portfolio of $0.5 million and a decrease in the other portfolio of $0.7 million. Within the apartment portfolio, the $3.5 million increase was due to developed properties in the lease up phase and $0.2 million from newly acquired properties, offset by a $0.8 million decrease in the same property portfolio. Within the commercial portfolio, the $1.0 million increase was due to newly acquired properties and a $1.2 million decrease from the same properties.
Property operating expenses decreased by $4.6 million as compared to prior year period which by segment is a decrease in the apartment portfolios of $2.4 million, commercial properties of $0.7 million, hotel portfolio of $0.6 million and land and other portfolio of $0.9 million. Within the apartment portfolio, decreases came from same properties, which decreased $2.9 million, and developed properties increased by $0.5 million. Within the commercial properties, the same properties decreased $1.0 million and the acquired properties increased $0.3 million.
Depreciation and amortization increased $1.5 million as compared to the prior year period, which by segment was an increase in the apartment portfolio of $1.0 million and an increase in the commercial portfolio of $0.5 million. Within the apartment portfolio, the developed properties increased $1.0 million. Within the commercial portfolio, the same properties increased $0.1 million and the acquired properties increased $0.4 million.
General and administrative costs decreased $1.6 million as compared to the prior year period due to decrease in office rent space expense, cost reimbursements and miscellaneous expenses not needed in 2009.
Other income decreased $1.6 million as compared to the prior year period. We had $0.5 million of nonrecurring miscellaneous income.
Mortgage and loan interest expense increased $0.8 million as compared to the prior year period which by segment is an increase in the apartment portfolio of $1.7 million, a decrease in the commercial portfolio of $0.2 million, an increase in the land portfolio of $0.7 million and a decrease in the other portfolio of $1.4 million. Within the apartment portfolio, the same properties decreased $0.4 million, offset by an increase in the developed properties of $2.1 million. Within the commercial portfolio, the same properties increased $0.1 million and the acquired properties increased $0.1 million.
Earnings from unconsolidated subsidiaries increased $0.2 million as compared to prior year period. The increase is attributable to the lack of activity within the entities. In the prior year period, these entities had large non-recurring gains from the sale of properties.
Provision on impairment of notes receivable, investment in real estate partnerships, and real estate assets increased by $30.3 million as compared to the prior year period. Impairment was recorded as an additional loss in the investment portfolio of $18.0 million, impairment of $1.8 million of a commercial property, $7.3 million in land we currently hold and $3.2 million in land that was sold in the third quarter for a loss. As of June 30, 2009, properties were impaired to reflect reduced value. There was no impairment booked in the prior year quarter.
Gain on land sales increased by $5.2 million as compared to the prior year period. The increase was due to the sale of five tracts of land of approximately 18 acres. In the prior year period, we sold approximately 67 acres of land for a gain of $2.8 million.
Discontinued operations for 2009 relates to three properties consisting of an apartments sold in January 2009, an apartments and a shopping center sold in the second quarter 2009. The gains from the sale are included in the 2009 discontinued operations. The discontinued operations for 2008 relates to 30 income producing properties of which 27 were sold in 2008 consisting of 20 apartments, three commercial buildings, four hotels, two apartments and one commercial property sold during 2009.
Comparison of the six months ended June 30, 2009 as compared to the same period ended 2008
Rental and other property revenues increased by $3.9 million as compared to the prior year period which by segment was an increase in the apartment portfolio of $5.9 million and an increase in the commercial portfolio of $1.8 million, offset by a decrease in the hotel portfolio of $2.3 million, a decrease in the land portfolio of $1.0 million and a decrease in the other portfolio of $0.5 million. Within the apartment portfolio, the increase was attributable to a $7.1 million from developed properties in the lease up phase and $0.8 million from newly acquired properties, offset by a $2.0 million decrease in the same property portfolio. Within the commercial portfolio, the increase was attributable to a $2.7 million increase from newly acquired properties and a $0.9 million decrease from the same properties.
Property operating expenses decreased by $4.6 million as compared to the prior year period which by segment is an increase in the apartment portfolios of $0.7 million, a decrease in the commercial properties of $1.6 million, hotel portfolio of $1.3 million and land and other portfolio of $2.4 million. Within the apartment portfolio, increases came from developed properties which increased by $0.7 million. Within the commercial properties, the same properties decreased $1.7 million and the acquired properties increased $0.1 million.
Depreciation and amortization increased $2.5 million as compared to the prior year period, which by segment was an increase in the apartment portfolio of $1.7 million and an increase in the commercial portfolio of $0.8 million. Within the apartment portfolio, the developed properties increased $1.7 million. Within the commercial portfolio, the acquired properties increased $0.8 million.
General and administrative expenses decreased $2.3 million as compared to the prior year period due to decrease in office rent space expense, cost reimbursements and miscellaneous expenses not needed in 2009.
Other income increased $1.3 million as compared to the prior year period. The majority of the increase is from the gains on our disposition of our investment in the Korean REIT.
Mortgage and loan interest expense decreased $0.7 million as compared to the prior year period which by segment is an increase in the apartment portfolio of $1.2 million, a decrease in the commercial portfolio of $0.7 million, an increase in the land portfolio of $0.2 million, a decrease in the other portfolio of $1.5 million, and an increase in the hotel portfolio of $0.1 million. Within the apartment portfolio, the same properties increased $2.2 million, offset by a decrease in the developed properties of $1.0 million. Within the commercial portfolio, the acquired properties decreased $0.7 million.
Earnings from unconsolidated subsidiaries decreased $5.2 million as compared to prior year period. The decrease is attributable to the lack of activity within the entities. In the prior year period, these entities had large non-recurring gains from the sale of properties.
Provision on impairment of notes receivable, investment in real estate partnerships, and real estate assets increased by $18.6 million as compared to the prior year period. Impairment was recorded as an additional loss in the investment portfolio of $18.0 million, impairment of $1.8 million of a commercial property, $7.3 million in land we currently hold and $3.5 million in land that was sold in the third quarter for a loss. As of June 30, 2009, properties were impaired to reflect reduced value. In the prior year period, we posted a provision for doubtful collections on our receivables of $5.0 million and a $7.0 million reserve for certain investments within our portfolio.
Gain on land sales increased by $4.0 million as compared to the prior year period. The increase was due to the sale of five tracts of land of approximately 28 acres. In the prior year period, we sold approximately 81 acres of land for a gain of $4.2 million.
Discontinued operations for 2009 relates to three properties consisting of an apartments sold January 2009, an apartments and a shopping center sold second quarter 2009. The gains from the sale are included in the 2009 discontinued operations. The discontinued operations for 2008 relates to 30 income producing properties of which 27 were sold in 2008 consisting of 20 apartments, three commercial buildings, four hotels, and two apartments and one commercial property sold during 2009.
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, hotels, shopping centers and developed and undeveloped land. We invest in real estate through direct equity ownership and partnerships nationwide. For more information, go to ARL’s web site at www.amrealtytrust.com.
| AMERICAN REALTY INVESTORS, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (unaudited) | ||||||||
| June 30, | December 31, | |||||||
| 2009 | 2008 | |||||||
| (dollars in thousands, except share and par value amounts) | ||||||||
| Assets | ||||||||
| Real estate, at cost | $ | 1,700,896 | $ | 1,712,506 | ||||
| Real estate held for sale at cost, net of depreciation | - | 10,333 | ||||||
| Real estate subject to sales contracts at cost, net of depreciation | 54,220 | 55,100 | ||||||
| Less accumulated depreciation | (178,930 | ) | (164,537 | ) | ||||
| Total real estate | 1,576,186 | 1,613,402 | ||||||
| Notes and interest receivable | ||||||||
| Performing | 79,596 | 68,845 | ||||||
| Non-performing | 3,262 | 20,032 | ||||||
| Less allowance for estimated losses | (10,044 | ) | (11,874 | ) | ||||
| Total notes and interest receivable | 72,814 | 77,003 | ||||||
| Cash and cash equivalents | 3,764 | 6,042 | ||||||
| Restricted cash | - | 271 | ||||||
| Investments in securities | - | 2,775 | ||||||
| Investments in unconsolidated subsidiaries and investees | 26,941 | 27,113 | ||||||
| Other assets | 108,156 | 115,547 | ||||||
| Total assets | $ | 1,787,861 | $ | 1,842,153 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Notes and interest payable | $ | 1,324,289 | $ | 1,311,935 | ||||
| Notes related to assets held-for-sale | - | 7,722 | ||||||
| Notes related to subject to sales contracts | 62,155 | 62,972 | ||||||
| Stock-secured notes payable | 14,020 | 14,026 | ||||||
| Accounts payable and other liabilities | 136,723 | 147,920 | ||||||
| 1,537,187 | 1,544,575 | |||||||
| Commitments and contingencies: | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred Stock, $2.00 par value, authorized 15,000,000 shares, | ||||||||
| issued and outstanding Series A, 3,390,913 shares in 2009 and in | ||||||||
| 2008 (liquidation preference $33,909), including 900,000 shares in | ||||||||
| 2009 and 2008 held by subsidiaries | 4,979 | 4,979 | ||||||
| Common Stock, $.01 par value, authorized 100,000,000 shares; issued | ||||||||
| 11,874,138 shares in 2009 and in 2008 | 114 | 114 | ||||||
|
Treasury stock at cost; 637,072 shares in 2009 and 2008, which |
||||||||
|
includes 276,972 shares held by TCI (consolidated) as of 2009 and 2008 |
(5,954 | ) | (5,954 | ) | ||||
| Paid-in capital | 91,946 | 92,609 | ||||||
| Retained earnings | 83,465 | 119,599 | ||||||
| Accumulated other comprehensive income | 2,185 | 4,331 | ||||||
| Total American Realty Investors shareholders' equity | 176,735 | 215,678 | ||||||
| Non-controlling interest | 73,939 | 81,900 | ||||||
| Total equity | 250,674 | 297,578 | ||||||
| Total liabilities and equity | $ | 1,787,861 | 1,842,153 | |||||
| AMERICAN REALTY INVESTORS, INC. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| (dollars in thousands, except share and per share amounts) | ||||||||||||||||
| Revenues: | ||||||||||||||||
| Rental and other property revenues | $ | 46,340 | $ | 45,388 | $ | 93,471 | $ | 89,610 | ||||||||
| Expenses: | ||||||||||||||||
| Property operating expenses | 23,660 | 28,221 | 54,039 | 58,602 | ||||||||||||
| Depreciation and amortization | 8,209 | 6,664 | 16,001 | 13,494 | ||||||||||||
| General and administrative | 2,120 | 3,701 | 5,262 | 7,610 | ||||||||||||
| Advisory fee to affiliate | 3,838 | 3,921 | 7,685 | 7,895 | ||||||||||||
| Total operating expenses | 37,827 | 42,507 | 82,987 | 87,601 | ||||||||||||
| Operating income | 8,513 | 2,881 | 10,484 | 2,009 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | (64 | ) | 1,619 | 2,265 | 3,719 | |||||||||||
| Other income | 493 | 2,054 | 5,036 | 3,782 | ||||||||||||
| Mortgage and loan interest | (23,009 | ) | (22,187 | ) | (44,087 | ) | (44,773 | ) | ||||||||
| Earnings (loss) from unconsolidated subsidiaries and investees | (197 | ) | (416 | ) | (197 | ) | 4,970 | |||||||||
| Gain on foreign currency translation | 604 | - | 78 | - | ||||||||||||
| Provision on impairment of note receivables and real estate assets | (30,260 | ) | - | (30,639 | ) | (12,000 | ) | |||||||||
| Litigation settlement | 301 | 4 | 301 | - | ||||||||||||
| Total other expenses | (52,132 | ) | (18,926 | ) | (67,243 | ) | (44,302 | ) | ||||||||
| Loss before gain on land sales, non-controlling interest, and taxes | (43,619 | ) | (16,045 | ) | (56,759 | ) | (42,293 | ) | ||||||||
| Gain on land sales | 8,040 | 2,890 | 8,208 | 4,165 | ||||||||||||
| Loss from continuing operations before tax | (35,579 | ) | (13,155 | ) | (48,551 | ) | (38,128 | ) | ||||||||
| Income tax benefit (expense) | 684 | (541 | ) | 2,230 | 33,507 | |||||||||||
| Net loss from continuing operations | (34,895 | ) | (13,696 | ) | (46,321 | ) | (4,621 | ) | ||||||||
| Discontinued operations: | ||||||||||||||||
| Loss from discontinued operations | (206 | ) | (5,591 | ) | (150 | ) | (19,684 | ) | ||||||||
| Gain on sale of real estate from discontinued operations | 2,161 | 3,764 | 6,932 | 115,134 | ||||||||||||
| Income tax benefit (expense) from discontinued operations | (684 | ) | 640 | (2,374 | ) | (33,408 | ) | |||||||||
| Net income (loss) | (33,624 | ) | (14,883 | ) | (41,913 | ) | 57,421 | |||||||||
| Less: net income (loss) attributable to non-controlling interests | 5,338 | 2,417 | 7,023 | (9,460 | ) | |||||||||||
| Net income (loss) attributable to American Realty Investors, Inc. | (28,286 | ) | (12,466 | ) | (34,890 | ) | 47,961 | |||||||||
| Preferred dividend requirement | (622 | ) | (623 | ) | (1,244 | ) | (1,246 | ) | ||||||||
| Net income (loss) applicable to common shares | $ | (28,908 | ) | $ | (13,089 | ) | $ | (36,134 | ) | $ | 46,715 | |||||
| Earnings per share - basic | ||||||||||||||||
| Loss from continuing operations | $ | (2.69 | ) | $ | (1.14 | ) | $ | (3.60 | ) | $ | (0.56 | ) | ||||
| Discontinued operations | 0.12 | (0.11 | ) | 0.38 | 5.02 | |||||||||||
| Net income (loss) applicable to common shares | $ | (2.57 | ) | $ | (1.25 | ) | $ | (3.22 | ) | $ | 4.46 | |||||
| Earnings per share - diluted | ||||||||||||||||
| Loss from continuing operations | $ | (2.69 | ) | $ | (1.14 | ) | $ | (3.60 | ) | $ | (0.56 | ) | ||||
| Discontinued operations | 0.12 | (0.11 | ) | 0.38 | 5.02 | |||||||||||
| Net income (loss) applicable to common shares | $ | (2.57 | ) | $ | (1.25 | ) | $ | (3.22 | ) | $ | 4.46 | |||||
| Weighted average common share used in computing earnings per share | 11,237,066 | 10,443,041 | 11,237,066 | 10,447,041 | ||||||||||||
| Weighted average common share used in computing diluted earnings per share | 11,237,066 | 10,443,041 | 11,237,066 | 10,447,041 | ||||||||||||
| Amounts attributable to American Realty Investors, Inc. | ||||||||||||||||
| Loss from continuing operations | $ | (29,658 | ) | $ | (11,279 | ) | $ | (39,197 | ) | $ | (4,614 | ) | ||||
| Income (loss) from discontinued operations | 1,372 | (1,187 | ) | 4,307 | 52,575 | |||||||||||
| Net income (loss) | $ | (28,286 | ) | $ | (12,466 | ) | $ | (34,890 | ) | $ | 47,961 | |||||
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