Edgar Filing: AMERICAN REALTY INVESTORS INC

Form 8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

October 25, 2004 (October 19, 2004)

Date of Report (Date of Earliest Event Reported)

AMERICAN REALTY INVESTORS, INC.

(Exact Name of Registrant as Specified in Its Charter)


Nevada	1-15663	75-2847135
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File No.)	(I.R.S. Employer Identification No.)


1800 Valley View Lane, Suite 300, Dallas, Texas		75234
(Address of Principal Executive Office)		(Zip Code)

(469) 522-4200

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

In 2004, American Realty Investors, Inc. (“ARI”) and its subsidiaries, including Transcontinental Realty Investors, Inc. (“TCI”), sold a significant amount of its assets (in excess of 10% of total assets at December 31, 2003), the last sale of which was completed on October 19, 2004. The nature and amount of consideration given principally involved cash received, seller financing provided by ARI, and/or debt assumed by purchaser, and the principle followed in determining the amount of such consideration was negotiations between seller and purchaser.

Although ARI seeks to maximize long-term profitability for its stockholders through the development, acquisition, and disposition of properties, ARI intends to continue to pursue its development, acquisition, and disposition strategies in the ordinary course of the business of ARI and its subsidiaries, including TCI. ARI and its subsidiaries at all times, and currently, are in various stages of discussions and negotiations with respect to development, acquisition, and disposition projects. Selective dispositions have been a part of ARI’s strategy to create an efficient portfolio and provide additional sources of capital for future use.

Properties sold by TCI and its subsidiaries are identified in the table below with “(T)”. The properties sold are as follows:


Date of Completion or Sale Date	Description of Asset or Property	Location	Units/Sq. Ft. / Acres	Sales Price (in thousands)		Gain/(Loss) on Sale (in thousands)			% of ARI’s Consolidated Assets		Purchaser
03/03/04	Tiberon Trails	Merrillville, IN	376 Units	$	10,325	$	49		0.96	%	Tiberon Trails, LLC
05/15/04	Sandstone (T)	Mesa, AZ	238 Units		8,650		1,688		0.54	%	Palm Desert Villas, L.P.
05/21/04	Cliffs of El Dorado (T)	McKinney, TX	208 Units		13,442		—		0.88	%	Unified Housing of McKinney, LLC⁽¹⁾
06/04/04	Park Avenue	Tallahassee, FL	121 Units		6,225		3,922		0.13	%	Park Avenue Villas, LLC
08/18/04	Falcon House	Ft. Walton, FL	82 Units		3,330		1,209		0.16	%	First American Exchange Corp.
10/15/04	In the Pines (T)	Gainesville, FL	242 Units		11,300		5,525		0.35	%	In the Pines Florida, LLC
02/04/04	Plaza on Bachman Creek	Dallas, TX	80,278 Sq. Ft.		7,850		3,682		0.27	%	Ameriton Properties Incorporated
02/17/04	Countryside Harmon (T)	Sterling, VA	5,000 Sq. Ft.		2,650		1,861		0.06	%	Saul Holdings L.P.
02/17/04	Countryside Retail (T)	Sterling, VA	133,422 Sq. Ft.		27,100		6,807		1.45	%	Saul Holdings L.P.
02/26/04	Ogden Industrial (T)	Ogden, UT	107,112 Sq. Ft.		2,600		1,474		0.08	%	Flying Colors Group, L.P.
02/27/04	Brandeis (T)	Omaha, NE	319,234 Sq. Ft.		—		(92	)	0.63	%	Mack-Cali Sub XV Trust
03/01/04	K-Mart (T)	Cary, NC	92,033 Sq. Ft.		3,200		—		0.19	%	Basic Capital Management, Inc. ⁽²⁾
03/01/04	Texstar Warehouse (T)	Arlington, TX	97,846 Sq. Ft.		2,400		—		0.10	%	Basic Capital Management, Inc. ⁽²⁾
03/29/04	Kelly Warehouse (Pinewood) (T)	Dallas, TX	100,000 Sq. Ft.		1,650		153		0.11	%	BHP Sale Builders Hardware Ltd.
05/07/04	Atrium (T)	Palm Beach, FL	74,603 Sq. Ft.		5,775		708		0.39	%	Hayden Properties, LLC
06/04/04	4135 Beltline (T)	Addison, TX	90,000 Sq. Ft.		4,900		337		0.35	%	Beltline Realty Partners, Ltd.; Three Rivers Title Co., Inc.; & First American Exchange Corporation
07/09/04	Kelly Warehouse (Cash Road) (T)	Dallas, TX	97,150 Sq. Ft.		1,500		448		0.08	%	Larson Group, L.P.
09/30/04	The Collection	Denver, CO	267,812 Sq. Ft.		21,200		3,314		1.39	%	Center Street, LLC; JSF Collections (Sun Terrace), LLC; & Denver Collection, LLC
10/19/04	One Steeplechase (T)	Sterling, VA	103,376 Sq. Ft.		11,900		6,259		0.40	%	21700 Atlantic, LLC
01/30/04	Red Cross (T)	Dallas, TX	2.9 Acres		8,500		—		0.56	%	Shafer Property Company
02/27/04	Mason Goodrich	Houston, TX	5.7 Acres		686		379		0.02	%	KMC Phase III, LP
03/27/04	Mason Goodrich	Houston, TX	8.0 Acres		1,045		617		0.03	%	Mason Creek, LP
03/29/04	Allen (T)	Collin County, TX	492.5 Acres		19,962		2,756		0.88	%	Blue Star Land, L.P.
08/09/04	Rasor (T)	Plano, TX	24.5 Acres		2,600		220		0.19	%	Donald C. Carter
09/17/04	Vista Ridge	Lewisville, TX	1.3 Acres		310		131		0.01	%	Texas Gurukul, LLC
10/12/04	Mason Goodrich	Houston, TX	4.0 Acres		523		306		0.01	%	Ginter Family Investments, Ltd.

				$	179,623	$	41,753		10.22	%

(1)	Ted P. Stokely, the General Manager of Unified Housing Foundation, Inc., the manager of Unified Housing of McKinney, LLC, is a Director of ARI and TCI.

(2)	Basic Capital Management, Inc. is an affiliate of ARI.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

The unaudited pro forma statements of operations are presented for the six months ended June 30, 2004 and the year ended December 31, 2003. The unaudited pro forma statements of operations present ARI’s operations as if the transactions described above had occurred at January 1 of each of the periods presented. An unaudited pro forma balance sheet as of June 30, 2004, is also presented. The unaudited pro forma balance sheet presents the property sales described above, as if they had occurred at January 1, 2004.

The unaudited pro forma condensed combined financial statements should be read in conjunction with ARI’s financial statements and related notes included in ARI’s Report on Form 10-Q for the quarter ended June 30, 2004 and the Report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission.

AMERICAN REALTY INVESTORS, INC.

PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET

JUNE 30, 2004

(Dollars in thousands)


Assets	Actual ⁽¹⁾			Kelley (Cash Road) ⁽²⁾			Rasor ⁽²⁾			Falcon House ⁽²⁾			Vista Ridge ⁽²⁾			The Collection ⁽²⁾			Mason Goodrich ⁽²⁾			In the Pines ⁽²⁾			One Steeplechase ⁽²⁾			Totals
Real estate held for investment	$	1,086,948		$	—		$	(2,380	)	$	(2,036	)	$	—		$	(20,701	)	$	—		$	(5,564	)	$	(8,967	)	$	1,047,300
Less – accumulated depreciation		(180,959	)		—			—			119			—			3,823			—			1,234			4,117			(171,666	)

		905,989			—			(2,380	)		(1,917	)		—			16,878			—			(4,330	)		(4,850	)		875,634

Real estate held for sale		149,014			(981	)		—			—			(134	)		—			(179	)		—			—			147,720

Notes and interest receivable
Performing		69,875			—			—			—			—			—			—			—			—			69,875
Nonperforming		10,932			—			—			—			—			—			—			—			—			10,932

		80,807			—			—			—			—			—			—			—			—			80,807
Less-allowance for estimated losses		(4,633	)		—			—			—			—			—			—			—			—			(4,633	)

		76,174			—			—			—			—			—			—			—			—			76,174

Net pizza parlor equipment		6,937			—			—			—			—			—			—			—			—			6,937

Marketable equity securities, at market value		5,439			—			—			—			—			—			—			—			—			5,439
Cash and cash equivalents		7,003			1,128			2,600			1,178			259			350			33			3,518			4,041			20,110
Investments in equity investees		4,981			—			—			—			—			—			—			—			—			4,981
Goodwill, net of accumulated amortization		11,858			—			—			—			—			—			—			—			—			11,858
Other intangibles, net of accumulated amortization		1,504			—			—			—			—			—			—			—			—			1,504
Other assets		61,714			(288	)		(13	)		(60	)		—			6,093			(8	)		(1,493	)		(1,864	)		64,081

Total Assets	$	1,230,613		$	(141	)	$	207		$	(799	)	$	125		$	(10,435	)	$	(154	)	$	(2,305	)	$	(2,673	)	$	1,214,438


Liabilities and Equity
Notes and interest payable	$	889,146		$	—		$	(1,260	)	$	(1,963	)	$	—		$	(13,153	)	$	(436	)	$	(5,246	)	$	(7,682	)	$	859,406
Liabilities related to assets held for sale		108,197			(465	)		—			—			—			—			—			—			—			107,732
Margin borrowings		21,509			—			—			—			—			—			—			—			—			21,509
Accounts payable and other liabilities		85,294			(2,181	)		(1,514	)		(43	)		(6	)		(149	)		(16	)		(197	)		(171	)		81,017

		1,104,146			(2,646	)		(2,774	)		(2,006	)		(6	)		(13,302	)		(452	)		(5,443	)		(7,853	)		1,069,664

Minority Interest		57,310			—			—			—			—			—			—			—			—			57,310

Stockholders’ Equity
Preferred Stock		5,251			—			—			—			—			—			—			—			—			5,251
Common Stock		114			—			—			—			—			—			—			—			—			114
Paid-in capital		93,164			—			—			—			—			—			—			—			—			93,164
Accumulated (deficit)		(10,259	)		2,505			2,981			1,207			131			2,867			298			3,138			5,180			8,048
Treasury stock		(18,458	)		—			—			—			—			—			—			—			—			(18,458	)
Accumulated other comprehensive income		(655	)		—			—			—			—			—			—			—			—			(655	)

Total Stockholders’ Equity		69,157			2,505			2,981			1,207			131			2,867			298			3,138			5,180			87,464


Total Liabilities and Equity	$	1,230,613		$	(141	)	$	207		$	(799	)	$	125		$	(10,435	)	$	(154	)	$	(2,305	)	$	(2,673	)	$	1,214,438

(1)	Includes properties sold prior to June 30, 2004.

(2)	Assumes sale by ARI on January 1, 2004

AMERICAN REALTY INVESTORS, INC.

PRO FORMA COMBINED STATEMENT OF OPERATIONS ^{(1) (2)}

SIX MONTHS ENDED JUNE 30, 2004

(Dollars in thousands, except per share)


	Actual			Apartments⁽³⁾			Commercial⁽⁴⁾			Land⁽⁵⁾			Pro Forma
Revenue:
Rents	$	96,729		$	(2,210	)	$	(3,555	)	$	—		$	90,964
Property operations		68,835			(1,517	)		(1,577	)		(20	)		65,721

		27,894			(693	)		(1,978	)		20			25,243

Land Operations:
Sales		30,194			—			—			3,433			33,627
Cost of sales		21,283			—			—			2,776			24,059
Deferral of gains on current period sales		5,159			—			—			—			5,159

Gain on land sales		3,752			—			—			657			4,409

Pizza Parlor Operations:
Sales		16,992			—			—			—			16,992
Cost of sales		13,137			—			—			—			13,137

Gross margin		3,855			—			—			—			3,855

Income from Operations:		35,501			(693	)		(1,978	)		677			33,507

Other Income:
Interest and other		2,450			—			—			—			2,450
Equity in loss of equity investees		(201	)		—			—			—			(201	)
Gain on foreign currency transaction		1,249			—			—			—			1,249

		3,498			—			—			—			3,498

Other Expense:
Interest		37,228			(554	)		(1,544	)		(65	)		35,065
Depreciation		14,585			(180	)		(704	)		—			13,701
Discount on sale of notes receivable		398			—			—			—			398
Advisory fees		5,228			(77	)		(203	)		(26	)		4,922
General and administrative		8,892			—			—			—			8,892
Minority interest		1,629			—			—			—			1,629

		67,960			(811	)		(2,451	)		(91	)		64,607


Net income (loss) from continuing operations	$	(28,961	)	$	118		$	473		$	768		$	(27,602	)


Basic and Diluted Earnings Per Share:
Net Loss from Continuing Operations	$	(2.72	)										$	(2.60	)


Weighted Average Common Shares Used in Computing Earnings Per Share		10,629,307												10,629,307

(1)

The Pro Forma Combined Statement of Operations assumes that each property was sold by ARI on January 1, 2004.

(2)

Operating results for properties are their actual operating results from January 1 to their respective dates of sale. Rents, property operations, interest expense and depreciation for non-land properties sold prior to August 15, 2004 were already excluded from the actual results of continuing operations in ARI’s Report on Form 10-Q for the quarter ended June 30, 2004.

(3)

Includes the Tiberon Trails Apartments sold in March 2004, the Cliffs of El Dorado and Sandstone Apartments sold in May 2004, the Park Avenue Apartments sold in June 2004, the Falcon House Apartments sold in August 2004, and the In the Pines Apartments sold in October 2004.

(4)

Includes Plaza on Bachman, Countryside Retail and Harmon, Brandeis, and Odgen Industrial sold in February 2004; K-Mart, Texstar Warehouse, and the Pinewood Warehouse (Kelly) sold in March 2004; the Atrium sold in May 2004; 4135 Beltline sold in June 2004; the Cash Road Warehouse (Kelly) sold in July 2004; The Collection sold in September 2004; and One Steeplechase sold in October 2004.

(5)

Includes Red Cross sold in January 2004, Mason Goodrich sold in February 2004, Allen and Mason Goodrich sold in March 2004, Rasor sold in August 2004, Vista Ridge sold in September 2004, and Mason Goodrich sold in October 2004.

AMERICAN REALTY INVESTORS, INC.

PRO FORMA COMBINED STATEMENT OF OPERATIONS ^{(1) (2)}

YEAR ENDED DECEMBER 31, 2003

(Dollars in thousands, except per share)


	Actual			Apartments⁽³⁾			Commercial⁽⁴⁾			Land⁽⁵⁾			Pro Forma
Property revenue:

Rents	$	166,908		$	(4,653	)	$	(14,534	)	$	(11	)	$	147,710
Property operations		116,454			(2,518	)		(6,435	)		(267	)		107,234

		50,454			(2,135	)		(8,099	)		256			40,476

Land Operations:
Sales		67,283			—			—			33,626			100,909
Cost of Sales		39,883			—			—			24,358			64,241
Deferred Gain on Sale		3,493			—			—			5,159			8,652
Recognition of previously deferred gains		19,924			—			—			—			19,924

Gain on Land Sales		43,831			—			—			4,109			47,940

Pizza Parlor Operations:
Sales		33,057			—			—			—			33,057
Cost of sales		26,051			—			—			—			26,051

Gross margin		7,006			—			—			—			7,006

Income from Operations:		101,291			(2,135	)		(8,099	)		4,365			95,422

Other income:
Interest and other		24,640			—			—			—			24,640
Equity in loss of equity investees		(4,441	)		—			—			—			(4,441	)

		20,199			—			—			—			20,199

Other expense:
Interest		71,008			(1,869	)		(3,597	)		(1,553	)		63,989
Depreciation		25,848			(534	)		(2,331	)		—			22,983
Discount on sale of note receivable		2,220			—			—			—			2,220
General & administrative		22,124			—			—			—			22,124
Advisory fee to affiliates		9,345			(312	)		(629	)		(176	)		8,228
Litigation settlement		15			—			—			—			15
Writedown of assets held for sale		19,892			—			—			—			19,892
Loss on foreign currency translation		3,309			—			—			—			3,309
Minority interest		347			—			1,064			—			1,411

		154,108			(2,715	)		(5,493	)		(1,729	)		144,171


Net income (loss) from continuing operations	$	(32,618	)	$	580		$	(2,606	)	$	6,094		$	(28,550	)


Basic and Diluted Earnings Per Share:
Net Loss from Continuing Operations	$	(3.02	)										$	(2.65	)


Weighted Average Common Shares Used in Computing Earnings Per Share		10,789,352												10,789,352

The accompanying footnotes are an integral part of this Pro Forma Combined Statement of Operations

AMERICAN REALTY INVESTORS, INC.

NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2003

(1)	The Pro Forma Combined Statement of Operations assumes that each property was sold by ARI on January 1, 2003.

(2)

Operating results for properties are their actual operating results for 2003. Rents, property operations, interest expense and depreciation for non-land properties sold prior to April 1, 2004 were already excluded from the actual results of continuing operations in ARI’s Annual Report on Form 10-K for the year ended December 31, 2003.

(3)	Includes the Tiberon Trails Apartments sold in March 2004, the Cliffs of El Dorado and Sandstone Apartments sold in May 2004, the Park Avenue Apartments sold in June 2004, the Falcon House Apartments sold in August 2004, and the In the Pines Apartments sold in October 2004.

(4)

(5)	Includes Red Cross sold in January 2004, Mason Goodrich sold in February 2004, Allen and Mason Goodrich sold in March 2004, Rasor sold in August 2004, Vista Ridge sold in September 2004, and Mason Goodrich sold in October 2004.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	AMERICAN REALTY INVESTORS, INC.

Date: October 25, 2004	By:	/s/ J. C. Lowenberg III
		J. C. Lowenberg III
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Acting Principal Executive Officer)


Date: October 25, 2004	By:	/s/ Scott T. Lewis
		Scott T. Lewis
		Vice President and Chief Accounting Officer