American Realty Investors, Inc. Reports Earnings for Quarter Ended December 31, 2024

Rhea-AI Summary

American Realty Investors (NYSE:ARL) reported Q4 2024 financial results with a reduced net loss of $0.2 million ($0.01 per share), compared to a $2.1 million loss ($0.13 per share) in Q4 2023. The company's portfolio showed mixed performance with:

• Total occupancy at 81%, with 94% in multifamily and 53% in commercial properties
• Rental revenues decreased to $11.2 million from $12.8 million year-over-year
• Net operating loss improved to $1.8 million from $2.2 million

Key developments include a new 45,000 sq ft lease at Stanford Center with 20% higher rent rates, a $27.5 million construction loan for a 234-unit Dallas multifamily project, a $23.4 million litigation settlement with Clapper, and a $1.1 million gain from selling 30 single-family lots in Windmill Farms.

Positive

• Net loss improved significantly from $2.1M to $0.2M year-over-year
• Operating expenses decreased by $2.4M
• New Stanford Center lease secured with 20% higher rent rates
• Secured $27.5M construction loan for new Dallas multifamily development
• $1.1M gain realized from Windmill Farms lot sales

Negative

• Rental revenues declined by $1.6M year-over-year
• Low commercial property occupancy at 53%
• $23.4M litigation settlement expense
• Continued operating loss of $1.8M in Q4 2024

Insights

Financial Analyst

ARL's Q4 2024 results show a significant improvement in bottom-line performance despite operational challenges. The company narrowed its quarterly loss to $0.2 million ($0.01 per share) from $2.1 million ($0.13 per share) year-over-year. This improvement came despite a $1.6 million decrease in rental revenues, highlighting effective expense management as operating expenses fell by $2.4 million.

The $23.4 million litigation settlement is particularly notable, representing approximately 10% of ARL's current market capitalization. While this one-time expense significantly impacted quarterly results, resolving this 25-year legal dispute removes a substantial contingent liability from the balance sheet. The $1.1 million gain from selling 30 single-family lots provided some offset but was relatively minor compared to the settlement cost.

ARL's new $27.5 million construction loan for the Mountain Creek multifamily development (total cost: $49.8 million) demonstrates confidence in the multifamily sector despite current commercial property challenges. The SOFR plus 3.45% interest rate is reasonable in the current lending environment, though this additional leverage increases financial risk if occupancy issues persist.

Real Estate Investment Expert

ARL's property portfolio presents a tale of two markets. The 94% occupancy in multifamily properties demonstrates resilience in this segment, while the concerning 53% commercial occupancy rate signals significant challenges in their office/retail holdings. This bifurcation reflects broader market trends where multifamily has outperformed commercial properties.

The new 45,000 square foot lease at Stanford Center represents a positive development following renovation investments. The 14% occupancy increase and 20% rent premium over previous leases validate the renovation strategy, though one lease doesn't solve the overall commercial vacancy issues. With commencement scheduled for April 2025, this won't impact financial results until next fiscal year.

The 234-unit multifamily development in Dallas shows management's strategic pivot toward the stronger-performing residential segment. With completion expected in 2026, this $49.8 million investment represents a meaningful expansion of their multifamily portfolio. The $1.4 million sale of single-family lots in Windmill Farms indicates selective monetization of land assets at attractive margins (79% profit). This capital recycling strategy makes sense, but improving commercial occupancy remains the more immediate challenge for operational cash flow.

DALLAS--(BUSINESS WIRE)-- American Realty Investors, Inc. (NYSE:ARL) is reporting its results of operations for the three months ended December 31, 2024. For the three months ended December 31, 2024, we reported net loss attributable to common shares of $0.2 million or $0.01 per diluted share, compared to net loss attributable to common shares of $2.1 million or $0.13 per diluted share for the same period in 2023.

Financial Highlights

• Total occupancy was 81% at December 31, 2024, which includes 94% at our multifamily properties and 53% at our commercial properties.

• On October 18, 2024, we completed a 45,000 square foot lease at Stanford Center. This is the first new lease at the property following our major renovation of the property. The new lease provides a 14% increase in occupancy to the property and a 20% increase in rent per square foot over recent expired leases at the property. The lease is expected to commence in April 2025.

• On October 21, 2024, we obtained a $27.5 million construction loan to finance the development of a 234 unit multifamily property in Dallas, Texas ("Mountain Creek") that is expected to be completed in 2026 for a total cost of approximately $49.8 million. The construction loan on Mountain Creek bears interest at SOFR plus 3.45% and matures on October 20, 2026.

• On October 31, 2024, we paid $23.4 million to resolve all claims litigation with David Clapper and related entities related (collectively, the “Clapper") that had been ongoing since 1999. The matter originally involved a transaction in 1998 in which we were to acquire eight multifamily properties from the Clapper. As a result of the settlement, we accrued a loss on real estate transactions of $23.4 million during the three and nine months ended December 31, 2024.

• On December 13, 2024, we sold 30 single family lots from our holdings in Windmill Farms for $1.4 million, resulting in a gain on sale of $1.1 million.

Financial Results

Rental revenues decreased $1.6 million from $12.8 million for the three months ended December 31, 2023 to $11.2 million for the three months ended December 31, 2024. The decrease in rental revenue is primarily due to a decrease in occupancy at our commercial properties.

Net operating loss decreased $0.4 million from $2.2 million for the three months ended December 31, 2023 to $1.8 million for the three months ended December 31, 2024. Our decrease in net operating loss was due to a $2.4 million decrease in operating expenses offset in part by a $2.0 million decrease in revenues. The decrease in operating expenses is primarily due to a decrease in depreciation for the three months ended December 31, 2024.

Net loss attributable to common shares decreased $2.0 million from $2.1 million for the three months ended December 31, 2023 to $0.2 million for the three months ended December 31, 2024. The decrease in net loss is primarily attributed to a decrease in loss on real estate transactions for the three months ended December 31, 2024.

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. The Company’s primary asset and source of its operating results is its investment in Transcontinental Realty Investors, Inc. (NYSE:TCI). For more information, visit the Company’s website at www.americanrealtyinvest.com.

AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
				Three Months Ended December 31,								Twelve Months Ended December 31,
				2024				2023				2024				2023
Revenues:
Rental revenues				$	11,222			$	12,787			$	44,763			$	47,023
Other income					817				1,260				2,555				3,477
Total revenue					12,039				14,047				47,318				50,500
Expenses:
Property operating expenses					6,816				7,316				27,063				27,896
Depreciation and amortization					2,847				4,031				12,276				13,646
General and administrative					1,845				1,587				6,395				10,011
Advisory fee to related party					2,315				3,304				8,225				10,187
Total operating expenses					13,823				16,238				53,959				61,740
Net operating loss					(1,784	)			(2,191	)			(6,641	)			(11,240	)
Interest income					3,940				1,646				19,973				26,847
Interest expense					(1,880	)			(1,928	)			(7,838	)			(9,502	)
Gain on foreign currency transactions					-				-				-				993
Loss on early extinguishment of debt					-				-				-				(1,710	)
Equity in income from unconsolidated joint venture					42				296				1,449				3,242
Loss on real estate transactions					(589	)			(2,079	)			(23,989	)			(1,923	)
Income tax provision					55				960				3,607				(1,456	)
Net (loss) income					(216	)			(3,296	)			(13,439	)			5,251
Net income (loss) attributable to noncontrolling interest					55				1,173				(1,264	)			(1,283	)
Net (loss) income attributable to common shares				$	(161	)		$	(2,123	)		$	(14,703	)		$	3,968
Earnings per share
Basic and diluted				$	(0.01	)		$	(0.13	)		$	(0.91	)		$	0.25
Weighted average common shares used in computing earnings per share
Basic and diluted					16,152,043				16,152,043				16,152,043				16,152,043

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20250320830632/en/

American Realty Investors, Inc.

Investor Relations

Erik Johnson (469) 522-4200

investor.relations@americanrealtyinvest.com

Source: American Realty Investors, Inc.

FAQ

What caused ARL's rental revenue decline in Q4 2024?

The decrease in rental revenue from $12.8M to $11.2M was primarily due to lower occupancy rates in commercial properties.

How much will ARL's new Mountain Creek development project cost?

The 234-unit multifamily property in Dallas is expected to cost approximately $49.8M and will be completed in 2026.

What are the terms of ARL's new Stanford Center lease agreement?

The 45,000 sq ft lease provides a 14% increase in occupancy and 20% higher rent per square foot, commencing April 2025.

How did ARL resolve its long-standing Clapper litigation?

ARL paid $23.4M to settle all claims with David Clapper related to a 1998 multifamily property transaction dispute.

What was ARL's occupancy rate breakdown in Q4 2024?

Total occupancy was 81%, with multifamily properties at 94% and commercial properties at 53%.