American Realty Investors(ARL) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements 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 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 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 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] Consolidated Statements of Cash Flows 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 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][20] - 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] 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 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] - 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] 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] Quantitative and Qualitative Disclosures About Market Risks 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] Controls and Procedures 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] - There were no material changes in the company's internal control over financial reporting during the most recent fiscal quarter[122] PART II. OTHER INFORMATION Legal Proceedings The company reported no new or material legal proceedings during the period - There are no legal proceedings to report for the period[123] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] - As of June 30, 2025, 263,250 shares may still be purchased under the existing repurchase program[124] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None reported[125] Mine Safety Disclosures This section is not applicable to the company - None reported[125] Other Information The company reported no other information - None reported[125] Exhibits 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] Signatures - The report was duly signed on August 7, 2025, by Erik L. Johnson, the President and Chief Executive Officer[129][130]