[Q2 2025 Financial and Operational Highlights](index=1&type=section&id=Q2%202025%20Financial%20and%20Operational%20Highlights) American Realty Investors achieved significant net income growth in Q2 2025, driven by increased rental revenue and strategic asset sales, while maintaining strong portfolio occupancy [Financial Performance](index=1&type=section&id=Financial%20Performance) Net income significantly increased in Q2 2025 due to higher rental revenues and a gain on real estate transactions, alongside a narrowed net operating loss Q2 2025 vs Q2 2024 Key Earnings Metrics (Amounts in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Common Shares) | $2.8 million | $1.2 million | | Diluted EPS | $0.18 | $0.07 | Q2 2025 vs Q2 2024 Revenue and Operating Loss (Amounts in millions) | Metric | Q2 2025 | Q2 2024 | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Rental Revenue | $11.5 million | $11.2 million | +$0.3 million | Increased occupancy at Stanford Center | | Net Operating Loss | $1.0 million | $1.3 million | -$0.3 million | Decrease in insurance and property tax costs | - The increase in net income is primarily attributed to a gain on real estate transactions, which was partially offset by a decrease in interest income and an increase in the tax provision for the quarter[6](index=6&type=chunk) [Operational Highlights](index=1&type=section&id=Operational%20Highlights) The company maintained an **82%** portfolio occupancy as of June 30, 2025, successfully selling single-family lots and repaying a **$10.8 million** loan - Total portfolio occupancy was **82%** as of June 30, 2025, which includes **94%** at multifamily properties and **57%** at commercial properties[9](index=9&type=chunk) - During Q2 2025, the company sold **30** single-family lots from its Windmill Farms holdings for **$1.4 million**, resulting in a gain on sale of **$1.1 million**[9](index=9&type=chunk) - On May 30, 2025, the company paid off the **$10.8 million** loan on its 770 South Post Oak property with cash on hand[9](index=9&type=chunk) [Company Overview](index=1&type=section&id=Company%20Overview) American Realty Investors, Inc. is a Dallas-based real estate investment company with a diverse U.S. portfolio, primarily driven by its investment in Transcontinental Realty Investors, Inc - ARL's portfolio includes office buildings, apartments, shopping centers, and both developed and undeveloped land across the U.S. The company invests through direct ownership, leases, partnerships, and mortgage loans[7](index=7&type=chunk) - The company's primary asset and source of operating results is its investment in Transcontinental Realty Investors, Inc. (NYSE:TCI)[7](index=7&type=chunk) [Consolidated Statements of Operations](index=2&type=section&id=Consolidated%20Statements%20of%20Operations) This section presents the detailed consolidated financial results for Q2 and H1 2025, highlighting revenue, expenses, and net income trends [Detailed Financial Results (Q2 & H1 2025 vs 2024)](index=2&type=section&id=Detailed%20Financial%20Results%20%28Q2%20%26%20H1%202025%20vs%202024%29) The detailed consolidated statements reveal increased total revenue and a significant rise in net income for Q2 and H1 2025, largely driven by real estate transaction gains Consolidated Statements of Operations (Unaudited, in thousands, except per share amounts) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | **Revenues:** | | | | | | Rental revenues | $11,510 | $11,188 | $22,937 | $22,467 | | Other income | $650 | $585 | $1,231 | $1,205 | | **Total revenue** | **$12,160** | **$11,773** | **$24,168** | **$23,672** | | **Expenses:** | | | | | | Property operating expenses | $6,535 | $6,624 | $12,512 | $13,258 | | Depreciation and amortization | $3,062 | $3,137 | $5,945 | $6,309 | | General and administrative | $1,534 | $1,552 | $3,026 | $2,960 | | Advisory fee to related party | $2,042 | $1,737 | $4,511 | $3,939 | | **Total operating expenses** | **$13,173** | **$13,050** | **$25,994** | **$26,466** | | **Net operating loss** | **($1,013)** | **($1,277)** | **($1,826)** | **($2,794)** | | Interest income | $3,353 | $4,794 | $7,363 | $10,527 | | Interest expense | ($1,777) | ($1,913) | ($3,597) | ($3,835) | | Equity in income from unconsolidated joint ventures | $19 | $501 | ($140) | $984 | | Gain on real estate transactions | $947 | $— | $4,838 | $— | | Income tax provision | $1,335 | ($614) | $189 | ($1,089) | | **Net income** | **$2,864** | **$1,491** | **$6,827** | **$3,793** | | Net income attributable to noncontrolling interest | ($37) | ($324) | ($1,035) | ($875) | | **Net income attributable to common shares** | **$2,827** | **$1,167** | **$5,792** | **$2,918** | | **Earnings per share (Basic and diluted)** | **$0.18** | **$0.07** | **$0.36** | **$0.18** |

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Total assets increased to $1.086 billion, net income rose to $5.79 million, and operating cash flow shifted to a $10.3 million use of cash for the six months ended June 30, 2025 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $1.086 billion by June 30, 2025, driven by real estate growth, with liabilities and equity also seeing increases Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$1,086,293** | **$1,032,802** | | Real estate | $605,862 | $557,388 | | Cash and cash equivalents | $15,465 | $19,918 | | **Total Liabilities** | **$278,221** | **$230,532** | | Mortgages and other notes payable | $215,951 | $185,398 | | **Total Equity** | **$808,072** | **$802,270** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Net income attributable to common shares nearly doubled to $5.8 million for the six months ended June 30, 2025, primarily due to a significant gain on real estate transactions Key Operating Results (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $12,160 | $11,773 | $24,168 | $23,672 | | Net Operating Loss | $(1,013) | $(1,277) | $(1,826) | $(2,794) | | Gain on real estate transactions | $947 | $— | $4,838 | $— | | Net Income Attributable to Common Shares | $2,827 | $1,167 | $5,792 | $2,918 | | EPS - basic and diluted | $0.18 | $0.07 | $0.36 | $0.18 | [Consolidated Statements of Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Equity) Total equity increased to $808.1 million by June 30, 2025, primarily driven by net income, partially offset by share repurchases - For the six months ended June 30, 2025, total equity increased by **$5.8 million**, primarily due to net income of **$6.8 million**[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash decreased by $6.3 million for the six months ended June 30, 2025, due to operating and investing outflows largely funded by financing activities Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(10,324) | $3,364 | | Net cash used in investing activities | $(25,431) | $(3,017) | | Net cash provided by (used in) financing activities | $29,494 | $(2,354) | | **Net decrease in cash** | **$(6,261)** | **$(2,007)** | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's structure, accounting policies, and property portfolio, highlighting its real estate development focus and related party management - The company's primary business is acquiring, developing, and owning income-producing multifamily and commercial properties, with substantially all operations conducted through its **78.4% owned subsidiary**, Transcontinental Realty Investors, Inc. (TCI)[19](index=19&type=chunk)[20](index=20&type=chunk) - Operations are managed by Pillar Income Asset Management, Inc. ("Pillar"), a related party, which handles investment opportunities, asset management, and financing, with the company having no direct employees[21](index=21&type=chunk) Property Portfolio as of June 30, 2025 | Property Type | Details | | :--- | :--- | | Office Buildings | 4 buildings, ~1,060,236 sq ft | | Multifamily Properties | 14 properties, 2,328 units | | Multifamily in Development | 4 properties, 906 units | | Land | ~1,792 acres | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income increased due to real estate gains, with the company heavily focused on multifamily development projects totaling $206.8 million in projected costs, funded partly by construction loans - The company is an externally advised real estate investment company focused on income-producing properties and land for development in the Southern United States[86](index=86&type=chunk) - Key recent activities include the sale of land lots at Windmill Farms, a condemnation settlement resulting in a **$3.1 million gain**, and paying off a **$10.8 million loan** on the 770 South Post Oak property[93](index=93&type=chunk) Multifamily Development Projects as of June 30, 2025 (in thousands) | Project | Units | Total Projected Cost | Costs Incurred | | :--- | :--- | :--- | :--- | | Alera | 240 | $55,330 | $51,047 | | Bandera Ridge | 216 | $49,603 | $44,045 | | Merano | 216 | $51,910 | $44,470 | | Mountain Creek | 234 | $49,971 | $5,171 | | **Total** | **906** | **$206,814** | **$144,733** | - For the six months ended June 30, 2025, Funds From Operations (FFO) increased to **$11.1 million** from **$9.4 million** in the prior year period[119](index=119&type=chunk) [Quantitative and Qualitative Disclosures About Market Risks](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) This optional section on market risks was not included in the report - The company has opted not to include quantitative and qualitative disclosures about market risks in this report[120](index=120&type=chunk) [Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[121](index=121&type=chunk) - There were no material changes in the company's internal control over financial reporting during the most recent fiscal quarter[122](index=122&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no new or material legal proceedings during the period - There are no legal proceedings to report for the period[123](index=123&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors were reported - The company states there have been no material changes from the risk factors disclosed in its 2024 Form 10-K[123](index=123&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased during the period, with 263,250 shares remaining available under the buyback program - No shares were repurchased under the company's buyback program during the six months ended June 30, 2025[124](index=124&type=chunk) - As of June 30, 2025, **263,250 shares** may still be purchased under the existing repurchase program[124](index=124&type=chunk) [Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None reported[125](index=125&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - None reported[125](index=125&type=chunk) [Other Information](index=26&type=section&id=Item%205.%20Other%20Information) The company reported no other information - None reported[125](index=125&type=chunk) [Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL data files - The report includes a list of filed exhibits, such as corporate governance documents, certifications by the CEO and CAO (Section 302 and 906), and XBRL data files[126](index=126&type=chunk) [Signatures](index=29&type=section&id=Signatures) - The report was duly signed on August 7, 2025, by Erik L. Johnson, the President and Chief Executive Officer[129](index=129&type=chunk)[130](index=130&type=chunk)

Summary of Ardea Resources (ARL) 2025 Conference Company Overview - **Company**: Ardea Resources (ARL) - **Industry**: Nickel and Cobalt Mining - **Key Projects**: Kalgoorlie Nickel Project, Goongari Hub Core Points and Arguments - **Ore Reserves**: The Goongari hub has a defined ore reserve for a 40-year operation, producing an average of 30,000 tonnes of nickel and 2,000 tonnes of cobalt annually, based on only six of nine deposits assessed [2][11] - **Strategic Partnerships**: Collaborating with Sumitomo Metals and Mining and Mitsubishi Corporation to complete a Definitive Feasibility Study (DFS) at the Kalgoorlie Nickel Project, with a total budget of $98.5 million fully funded by partners and some contributions from the Japanese government [4][15] - **Nickel Production**: The project is positioned to become a large-scale, long-life nickel-cobalt producer, with significant contained nickel resources of 4 million tonnes at the Goongari Hub and 2 million tonnes at the Kalpenny Hub [3][4] - **Technological Advancements**: Utilizing high-pressure acid leach technology, which has evolved significantly since the 1950s, to enhance nickel production efficiency [6][7] - **Growing Demand**: Nickel demand is experiencing unprecedented growth, driven by the electric vehicle sector and traditional uses such as stainless steel, with expectations for continued strong compound annual growth rates [8][9] - **Byproduct Potential**: The project also has a high endowment of scandium, which is valuable for lightweight aluminum alloys and solid-state fuel cells, indicating potential for additional revenue streams [10][11] Additional Important Content - **Cost Competitiveness**: The project is positioned in the bottom cost quartile of the nickel supply chain, with C1 costs estimated at $10,000 per tonne, making it competitive against international peers [13][14] - **ESG Standards**: Ardea Resources emphasizes high environmental, social, and governance (ESG) standards, with a commitment to minimizing CO2 emissions and contributing to local communities [16][18] - **Exploration Potential**: The tenements cover 3,500 square kilometers, with ongoing exploration for additional nickel laterite resources and other critical minerals such as rare earths and lithium [19][20] - **Government Support**: The Australian federal government has passed a production tax incentive, expected to provide a 10% rebate on processing operating costs, enhancing financial metrics for the project [14][15] - **Long-term Vision**: The project aims to deliver a multi-generational asset, with a focus on quality input and thorough development to ensure sustainability and resilience through commodity price cycles [15][21]

Project Overview - The Kalgoorlie Nickel Project (KNP) Goongarrie Hub has a project life of over 40 years, with planned production of 30ktpa of nickel and 2ktpa of cobalt[14] - The KNP Goongarrie Hub contains a Mineral Resource Estimate (MRE) of 584Mt at 0.69% Ni and 0.043% Co, for 4Mt of contained Ni and 250kt of contained Co[16] - The project's Definitive Feasibility Study (DFS) is fully funded by Japanese partners Sumitomo Metal Mining (SMM) and Mitsubishi Corporation (MC) up to A$98.5M[21] Partnership and Funding - SMM aims to increase nickel production from 81ktpa (FY23) to 150ktpa[22] - The Consortium (SMM and MC) is funding the DFS up to A$98.5M to earn up to 50% interest in Kalgoorlie Nickel Pty Ltd (KNPL)[21, 137] - Ardea retains 100% ownership of non-Goongarrie Hub KNP projects, including the Kalpini Hub with an MRE of 270Mt at 0.76% Ni and 0.05% Co, containing 2Mt of Ni and 136kt of Co[16, 81] Market and Production - Global MHP and MSP production has increased by over 300% since 2020[33] - Electric Vehicle (EV) sales grew by 28% year-to-date in H1 2025, with 9.1 million units sold[41] - Global energy storage grid deployments increased by 94% year-on-year in January 2025, reaching 13.6GWh[41] Financials and Costs - The Pre-Feasibility Study (PFS) indicates a low C1 Opex before Cobalt credit of US$10,197/t Ni in MHP LOM[65] - The project benefits from a potential 10% refund against processing costs for the first decade under Australia's "Critical Minerals Production Tax Inventive"[70] - The PFS outlines a pre-tax NPV7 of A$7,625M and a post-tax NPV7 of A$4,980M[118]

Summary of Ardea Resources (ARL) Conference Call - July 23, 2025 Company and Industry Overview - **Company**: Ardea Resources (ARL) - **Industry**: Nickel and Cobalt Mining, Electric Vehicle (EV) Battery Supply Chain Key Points and Arguments 1. **Kalgoorlie Nickel Project**: The project is Australia's largest nickel cobalt resource and ranks in the top 10 globally, indicating its strategic importance [1][2] 2. **Location and Infrastructure**: The Goongari project is located 70 kilometers northwest of Kalgoorlie, with supportive community and infrastructure for rapid development [2] 3. **Resource Scale**: The project has a global resource of approximately 6 million tons, with 1.3 million tons of ore reserve at Goongari, sufficient to produce 33 million electric vehicles [3] 4. **Joint Venture**: Ardea has a strategic joint venture with Sumitomo Metal Mining and Mitsubishi Corporation, with partners earning a 35% stake through funding a definitive feasibility study (DFS) budgeted at $98.5 million [3][4] 5. **Project Approvals and Funding**: All project approvals are in place, and development debt has been secured, positioning the project favorably for development [4] 6. **Nickel Laterite Production**: Nickel laterites account for about 80% of global nickel production, utilizing high-pressure acid leach technology, which has been successfully implemented by partners in challenging jurisdictions [6][7] 7. **Demand for Nickel**: The demand for nickel is driven by the energy transition, electric vehicles, and large-scale energy storage, with traditional uses like stainless steel also showing strong growth [10][11] 8. **Critical Minerals**: Nickel and cobalt are classified as critical minerals in Australia, Japan, and the United States, with potential for scandium production as well [11][12] 9. **Long Project Life**: The project is expected to have a mine life exceeding 50 years, with the potential for additional resource expansion [13][14] 10. **Cost Competitiveness**: The project has demonstrated bottom cost quartile operating costs, with nickel-only operating expenses at approximately $10,000 per ton [15] 11. **Tax Incentives**: The Australian federal government has introduced a production tax incentive, providing a 10% tax rebate on processing operating costs, enhancing the project's financial metrics [16] 12. **Exploration Potential**: The Eastern Goldfields region offers opportunities for further expansion, hosting various critical minerals [18] 13. **ESG Commitment**: Ardea is committed to environmental, social, and governance (ESG) practices, including gender diversity and community engagement [19][20] Additional Important Information - **Scandium Market**: The current scandium market is small at about 40 tons per annum but is expected to grow, particularly in aerospace and fuel cell applications [12] - **Stakeholder Relationships**: Strong local stakeholder relationships have been established, contributing to community support for the project [20] - **Future Developments**: The DFS is expected to yield increased news flow as it progresses, with a focus on leveraging existing infrastructure for future expansions [17][21]

Project Overview - The Kalgoorlie Nickel Project (KNP) Goongarrie Hub is the largest nickel-cobalt Mineral Resource Estimate (MRE) in Australia [9] - KNP Goongarrie Hub contains 584Mt at 0.69% Ni and 0.043% Co for 4Mt of contained Ni and 250kt of contained Co [10] - KNP Kalpini Hub contains 270Mt at 0.76% Ni and 0.05% Co for 2Mt of contained Ni and 136kt of contained Co [10] - The project has a forecast operation of +40 years [53] Partnership and Funding - Sumitomo Metal Mining (SMM) and Mitsubishi Corporation (MC) are fully funding the Definitive Feasibility Study (DFS) up to A$98.5M to earn up to 50% interest in Kalgoorlie Nickel Pty Ltd (KNPL) [15] - The Consortium earned its first 17.5% in July 2025 [15] HPAL Technology and Production - Global MHP and MSP production has increased by over 300% since 2020 [26] - HPAL now into 5th generation of technical advances [21] Market Demand - Electric Vehicle (EV) sales reached 9.1 million in H1 2025, a 28% year-to-date growth [35] - Global energy storage grid deployments reached 13.6GWh in January 2025, a 94% year-on-year increase [35] - Global steel consumption is projected to increase by 132Mt, or over 7% [38] Cost Competitiveness - The Pre-Feasibility Study (PFS) indicates a low C1 Opex before Cobalt credit of US$10,197/t Ni (US$4.62/lb) in MHP LOM [60] - Australia's recently approved tax credit provides a 10% refund against processing costs (64% of PFS Opex estimate) for the first decade [65] Financial Metrics (from 2023 PFS) - Pre-tax NPV7 of A$7,625M (IRR 30%) and Post-tax NPV7 of A$4,980M (IRR 23%) [114] - Average Annual EBITDA of A$800M [114]

[Q1 2025 Earnings Release](index=1&type=section&id=Q1%202025%20Earnings%20Release) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) For the first quarter of 2025, American Realty Investors reported a significant increase in net income attributable to common shares, rising to $3.0 million from $1.8 million in the prior year's quarter, primarily driven by a gain on real estate transactions and a $0.6 million reduction in operating expenses, which more than offset a slight increase in rental revenue, consequently, diluted earnings per share (EPS) grew to $0.18 from $0.11 year-over-year | Financial Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income to Common Shares | $3.0 million | $1.8 million | +$1.2 million | | Diluted EPS | $0.18 | $0.11 | +$0.07 | | Rental Revenues | $11.4 million | $11.3 million | +$0.1 million | | Net Operating Loss | ($0.8 million) | ($1.5 million) | +$0.7 million | - The increase in net income is primarily attributed to a higher gain on real estate transactions, partially offset by lower interest income and a higher income tax provision[4](index=4&type=chunk) - The net operating loss decreased mainly due to a **$0.6 million** reduction in operating expenses, specifically from lower insurance and property tax costs[3](index=3&type=chunk) [Operational Highlights](index=1&type=section&id=Operational%20Highlights) As of March 31, 2025, the company's total portfolio occupancy stood at 80%, composed of strong performance in multifamily properties at 94% occupancy, while commercial properties were at 53%, additionally realizing a $1.1 million gain from the sale of 30 single-family lots in December 2024 - Portfolio occupancy as of March 31, 2025: - Total Occupancy: **80%** - Multifamily Properties: **94%** - Commercial Properties: **53%**[6](index=6&type=chunk) - On December 13, 2024, the company sold 30 single-family lots from its Windmill Farms holdings for **$1.4 million**, resulting in a gain on sale of **$1.1 million**[6](index=6&type=chunk) [Consolidated Statements of Operations](index=2&type=section&id=Consolidated%20Statements%20of%20Operations) The Q1 2025 consolidated statement of operations shows total revenues of $12.0 million, a slight increase from $11.9 million in Q1 2024, with a notable decrease in property operating expenses contributing to total operating expenses falling to $12.8 million from $13.4 million, and a significant $3.9 million gain on real estate transactions being the primary driver for the increase in net income to $4.0 million, compared to $2.3 million in the prior-year period | (In thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Total Revenue** | **$12,008** | **$11,899** | | Total Operating Expenses | $12,821 | $13,416 | | **Net Operating Loss** | **($813)** | **($1,517)** | | Gain on real estate transactions | $3,891 | $— | | **Net Income** | **$3,963** | **$2,302** | | **Net Income Attributable to Common Shares** | **$2,965** | **$1,751** | [About the Company](index=1&type=section&id=About%20American%20Realty%20Investors%2C%20Inc.) American Realty Investors, Inc. is a Dallas-based real estate investment company with a diverse portfolio of equity real estate across the U.S., including office buildings, apartments, shopping centers, and land, and its primary asset and main driver of operating results is its investment in Transcontinental Realty Investors, Inc. (NYSE: TCI) - The company holds a diverse portfolio of U.S. real estate, including office buildings, apartments, shopping centers, and land, investing through direct ownership, leases, partnerships, and mortgage loans[5](index=5&type=chunk) - The company's primary asset and source of operating results is its investment in Transcontinental Realty Investors, Inc. (NYSE: TCI)[5](index=5&type=chunk)

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) American Realty Investors, Inc. reported Q1 2025 net income of **$4.0 million** (up from **$2.3 million**), driven by a **$3.9 million** real estate gain, with total assets at **$1.045 billion** and negative operating cash flow of **$7.4 million** due to development [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$1.045 billion** as of March 31, 2025, from **$1.033 billion** at year-end 2024, driven by real estate assets, with total liabilities rising to **$239.4 million** and total equity slightly increasing to **$805.6 million** Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$1,044,999** | **$1,032,802** | | Real estate | $582,232 | $557,388 | | Cash and cash equivalents | $13,800 | $19,918 | | **Total Liabilities** | **$239,445** | **$230,532** | | Mortgages and other notes payable | $201,695 | $185,398 | | **Total Equity** | **$805,554** | **$802,270** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported Q1 2025 net income attributable to common shares of **$3.0 million** (**$0.18 per share**), up from **$1.8 million** (**$0.11 per share**) in Q1 2024, mainly due to a **$3.9 million** gain on real estate transactions offsetting decreased net operating income and higher advisory fees Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $12,008 | $11,899 | | Total Operating Expenses | $12,821 | $13,416 | | Net Operating Loss | ($813) | ($1,517) | | Gain on real estate transactions | $3,891 | $0 | | **Net Income** | **$3,963** | **$2,302** | | **Net Income Attributable to Common Shares** | **$2,965** | **$1,751** | | **Earnings Per Share (EPS)** | **$0.18** | **$0.11** | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 operating cash flow was a net use of **$7.4 million**, a downturn from **$3.9 million** provided in Q1 2024, with investing activities using **$16.6 million** for development and financing providing **$15.6 million** from new mortgages, resulting in an **$8.4 million** decrease in cash Q1 2025 vs Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | ($7,408) | $3,867 | | Net Cash (Used in) Provided by Investing Activities | ($16,630) | $11,574 | | Net Cash Provided by (Used in) Financing Activities | $15,600 | ($1,456) | | **Net (Decrease) Increase in Cash** | **($8,438)** | **$13,985** | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's structure, accounting policies, and financial components, highlighting its multifamily and commercial segments, significant ongoing real estate development, debt obligations including a loan covenant breach, and extensive related-party transactions - The company's primary business is acquiring, developing, and owning income-producing multifamily and commercial properties Substantially all operations are conducted through its **78.4% owned subsidiary, Transcontinental Realty Investors, Inc. (TCI)**[19](index=19&type=chunk)[20](index=20&type=chunk) Segment Profit (in thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Multifamily Segment Profit | $4,724 | $4,291 | | Commercial Segment Profit | $1,307 | $974 | | **Total Profit from Segments** | **$6,031** | **$5,265** | - The company is actively developing four multifamily properties with a total projected cost of **$206.8 million**, of which **$119.0 million** has been incurred as of March 31, 2025[41](index=41&type=chunk) - The company was not in compliance with the minimum debt service coverage ratio (DSCR) for the loan on the 770 South Post Oak property, requiring surplus cash flow from the property to be held in a lockbox account[59](index=59&type=chunk) - Significant related-party transactions exist with Pillar (manager), Regis (property manager), and MRHI (controlling shareholder) In Q1 2025, fees paid to Pillar included **$2.5 million** for advisory services and **$0.7 million** for development[64](index=64&type=chunk)[66](index=66&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **$1.7 million** net income increase to a **$3.1 million** condemnation gain, offsetting a **$1.6 million** net interest income decrease, with significant focus on four multifamily developments, reflected in increased investing cash use and **$17.1 million** in new construction loans, resulting in **$5.2 million** FFO - Recent activities include the sale of land at Windmill Farms, which generated a **$3.1 million** gain from a condemnation settlement in March 2025[88](index=88&type=chunk) - The company is developing four multifamily properties (Alera, Bandera Ridge, Merano, Mountain Creek) with a total project cost of approximately **$207 million** In Q1 2025, **$26.3 million** in development costs were incurred, funded by **$17.1 million** in construction loans[89](index=89&type=chunk)[90](index=90&type=chunk) - The **$1.7 million** increase in net income was primarily driven by a **$3.9 million** gain on real estate transactions, while net interest income decreased by **$1.6 million** due to lower average balances on short-term investments[103](index=103&type=chunk)[109](index=109&type=chunk) - The significant increase in cash used in investing activities (**$28.2 million** YoY) was due to a **$20.7 million** increase in real estate development and renovation costs[107](index=107&type=chunk) FFO Reconciliation Summary (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income attributable to the Company | $2,965 | $1,751 | | Depreciation and amortization | $2,883 | $3,172 | | Gain on real estate transactions | ($3,891) | $0 | | **FFO-Basic and Diluted** | **$5,162** | **$4,976** | [Item 3. Quantitative and Qualitative Disclosures About Market Risks](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) This section is optional and was not included in the report - The company has opted not to include quantitative and qualitative disclosures about market risks in this report[115](index=115&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[117](index=117&type=chunk) - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[118](index=118&type=chunk) [PART II. OTHER INFORMATION](index=25&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no new legal proceedings in this section - The company reports 'None' for this item, indicating no new legal proceedings to disclose under this specific section[119](index=119&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the company's 2024 Form 10-K - No material changes to risk factors have occurred since the filing of the 2024 10-K[119](index=119&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any shares under its existing share repurchase program during Q1 2025, with **263,250 shares** remaining available for purchase - No shares were repurchased during Q1 2025 under the company's buyback program[120](index=120&type=chunk) - As of March 31, 2025, **263,250 shares** may still be purchased under the existing repurchase program[120](index=120&type=chunk) [Item 3. Defaults Upon Senior Securities](index=25&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - The company reports 'None' for this item[121](index=121&type=chunk) [Item 4. Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - The company reports 'None' for this item as it is not applicable[121](index=121&type=chunk) [Item 5. Other Information](index=25&type=section&id=Item%205.%20Other%20Information) The company reported no other information - The company reports 'None' for this item[121](index=121&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with or incorporated by reference into the Form 10-Q, including certifications by the CEO and CAO - The report includes a list of exhibits filed, such as corporate governance documents and officer certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[122](index=122&type=chunk)

Financial Performance - For Q4 2024, American Realty Investors, Inc. reported a net loss attributable to common shares of $0.2 million or $0.01 per diluted share, a significant improvement from a net loss of $2.1 million or $0.13 per diluted share in Q4 2023[2][8]. - Total revenue for Q4 2024 was $12.0 million, down from $14.0 million in Q4 2023[11]. - Net operating loss decreased by $0.4 million from $2.2 million in Q4 2023 to $1.8 million in Q4 2024, attributed to a $2.4 million decrease in operating expenses[5]. - Operating expenses decreased from $16.2 million in Q4 2023 to $13.8 million in Q4 2024[11]. - The company reported interest income of $3.9 million in Q4 2024, compared to $1.6 million in Q4 2023[11]. Revenue and Occupancy - Rental revenues decreased by $1.6 million from $12.8 million in Q4 2023 to $11.2 million in Q4 2024, primarily due to a decrease in occupancy at commercial properties[4]. - Total occupancy was 81% as of December 31, 2024, with multifamily properties at 94% and commercial properties at 53%[7]. Legal and Financial Transactions - A settlement of $23.4 million was paid to resolve ongoing litigation, resulting in an accrued loss on real estate transactions of $23.4 million for the period[7]. - The company sold 30 single-family lots for $1.4 million, resulting in a gain on sale of $1.1 million[7]. Development Projects - A $27.5 million construction loan was obtained for the development of a 234-unit multifamily property in Dallas, expected to be completed in 2026[7].

Debt and Indebtedness - Total indebtedness as of December 31, 2024, was approximately $185.4 million, with 68% ($126.3 million) insured by HUD[55][56]. - The degree of indebtedness could impact the company's ability to secure additional financing for working capital, capital expenditures, or acquisitions[63]. - The company operates with a policy of incurring additional indebtedness only when advisable, which may include borrowing under a line of credit or issuing debt securities[63]. Operational Risks - The company faces risks associated with increased operating costs, including insurance, maintenance, and administrative costs, which could adversely affect cash flow and shareholder distributions[50]. - The company is reliant on third-party management companies for property operations, which may impact profitability if these managers do not perform effectively[48][49]. - The company has ongoing development projects, but construction costs may exceed estimates, affecting profitability and project completion timelines[51]. - The company may encounter challenges in leasing newly developed properties at budgeted rental rates, impacting expected financial results[56]. - The company may face competition from other real estate investors, which could drive up acquisition costs and impact property performance[55][61]. Market Vulnerability - The company operates in specific geographic areas in the Southern United States, making it vulnerable to adverse economic conditions in those markets[54]. - Rising interest rates could increase costs on variable rate debt, adversely affecting cash flow and the ability to refinance existing debt[58]. - The company may not be able to sell properties quickly due to the illiquid nature of real estate investments, which could limit cash flow responses to changing circumstances[60]. Partnership and Liability Issues - Potential bankruptcy of partners could leave the company liable for the liabilities of the venture[63]. - Partners may have inconsistent economic or business interests that conflict with the company's objectives[63]. - Governing agreements in partnerships may restrict the transfer of interests, potentially resulting in disadvantageous terms[63]. Tenant Relations - The company’s ability to attract and retain tenants is critical for cash flow, and adverse events affecting existing tenants could hinder this ability[45].