DALLAS--(BUSINESS WIRE)--American Realty Investors, Inc. (NYSE: ARL), a Dallas-based real estate investment company, reported net income for the three months ended September 30, 2008. ARL reported a net loss applicable to common shares of ($8.5 million) or ($0.80) per diluted share for the three months ended September 30, 2008, as compared to a net loss applicable to common shares of ($3.4 million) or ($0.33) per diluted share for the same period ended 2007.

In addition, the Company reported net income for the nine months ended September 30, 2008. ARL reported net income applicable to common shares of $38.3 million or $3.64 per diluted share for the nine months ended September 30, 2008, as compared to a net loss applicable to common shares of ($35.5 million) or ($3.51) per diluted share for the same period ended 2007.

Results of operations for the three months ended September 30, 2008 as compared to the same period ended 2007

Rental and other property revenues increased by $5.3 million for the three months ended September 30, 2008 as compared to the same period ended 2007. The increase consisted of an increase in our apartment portfolio of $3.4 million, an increase in our commercial portfolio of $1.4 million, and an increase in our land portfolio of $0.6 million, offset by a decrease in our hotels of $0.1 million.

Property operating expense increased by $3.7 million for the three months ended September 30, 2008 as compared to the same period ended 2007. The increase consisted of increases in our apartment portfolio of $4.0 million and increases in our hotel portfolio of $0.7 million, offset by decreases in our land and other portfolio of $0.9 million.

Interest expense has decreased by $1.1 million for the three months ended September 30, 2008 as compared to the same period ended 2007. The decrease is due to the sale of several land parcels and a commercial building in the third quarter, thus reducing our debt balance and the associated interest expense.

Gain on land sales decreased by $5.8 million for the three months ended September 30, 2008 as compared to the same period ended 2007. We have sold few parcels of land as compared to prior period.

Minority interest income increased by $2.0 million for the three months ended September 30, 2008 as compared to the same period ended 2007. The increase is due to the recapture of the minority interest expense from the losses incurred in the third quarter.

Equity in income (loss) of investee represents our income portion of loss from investments account for using the equity method. For the three months ended September 2008, our investment in Gruppa Florentina, LLC, and LK Four Hickory Center LLC, had losses, offsetting gains in our other equity investees.

Net income from discontinued operations was $2.4 million for the three months ended September 30, 2008 as compared to a net income from discontinued operations of $5.4 million for the same period ended 2007. Discontinued operations consist of 29 apartments, seven commercial buildings of which one was sold in the third quarter of 2008, and five hotels.

Results of operations for the nine months ended September 30, 2008 as compared to the same period ended 2007

Rental and other property revenues have increased by $10.8 million for the nine months ended September 30, 2008 as compared to the same period ended 2007. The majority of the increase of $13.9 million is from our apartment portfolio. We also had an increase in our commercial portfolio of $0.9 million and an increase in our land portfolio of $1.7 million, offset by a decrease in our hotel portfolio of $0.9 million.

Operating expenses increased by $10.4 million for the nine months ended September 30, 2008 as compared to the same period ended 2007. The apartment and the commercial portfolios accounted for $9.5 million and $1.2 million of the increase, respectively. This increase was offset by a decrease of $0.3 million in our hotel, land and other portfolios.

Provision for allowance on notes receivable and impairment for the nine months ended September 30, 2008 was $12.0 million. We recorded a $5.0 million allowance for doubtful receivables and a $7.0 million allowance for the doubtful collectability of certain investments within our portfolio.

Gain on land sale has decreased by $6.4 million for the nine months ended September 30, 2008 as compared to the same period ended 2007. We have sold fewer parcels of land as compared to prior period.

Equity income in investees is $2.2 million for the nine months September 30, 2008. This amount represents our portion of income from investments account for using the equity method.

Net income from discontinued operations increased by $60.3 million for the nine months ended September 30, 2008 as compared to the same period ended 2007. Discontinued operations consists of 29 apartments of which 18 were sold in 2008, seven commercial buildings of which three were sold in 2008, and five hotels of which four were sold in 2008.

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 ARI’s web site at www.amrealtytrust.com.

AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
			2008				2007				2008				2007
		(dollars in thousands)								(dollars in thousands)
Revenue:
Rental and other property revenues		$	46,957			$	41,655			$	137,107			$	126,279
Expenses:
Property operating expenses			30,167				26,487				89,168				78,748
Depreciation and amortization			5,557				6,155				19,230				20,904
General and administrative			3,204				3,471				11,461				12,014
Advisory fee to affiliate			3,847				3,886				11,742				11,019
Total operating expenses			42,775				39,999				131,601				122,685
Operating income			4,182				1,656				5,506				3,594
Other income (expense):
Interest income			1,503				1,663				5,222				4,687
Other income			2,858				2,785				7,214				6,356
Mortgage and loan interest			(21,256	)			(22,333	)			(66,232	)			(66,741	)
Net income fee to affiliate			-				1				-				705
Gain on foreign currency translation			(480	)			-				(480	)			-
Provision for allowance on notes receivable and impairment			-				-				(12,000	)			-
Litigation settlement			785				(1,643	)			785				(1,595	)
Total other income (expense)			(16,590	)			(19,527	)			(65,491	)			(56,588	)
Loss before gain on land sales, minority interest, and equity in earnings (loss) of investees			(12,408	)			(17,871	)			(59,985	)			(52,994	)
Gain on land sales			1,172				7,010				5,337				11,704
Minority interest			1,962				(231	)			(165	)			(736	)
Equity in income (loss) of investees			(2,170	)			-				2,226				-
Loss from continuing operations before income tax benefit			(11,444	)			(11,092	)			(52,587	)			(42,026	)
Income tax benefit			1,266				2,909				32,452				2,922
Net loss from continuing operations			(10,178	)			(8,183	)			(20,135	)			(39,104	)
Income from discontinued operations before income tax expense			3,616				8,313				92,720				8,349
Income tax expense			(1,266	)			(2,909	)			(32,452	)			(2,922	)
Net income from discontinuing operations			2,350				5,404				60,268				5,427
Net income (loss)			(7,828	)			(2,779	)			40,133				(33,677	)
Preferred dividend requirement			(623	)			(626	)			(1,869	)			(1,869	)
Net income (loss) applicable to common shares		$	(8,451	)		$	(3,405	)		$	38,264			$	(35,546	)
Earnings per share
Basic earnings per share:
Income (loss) from continuing operations		$	(1.02	)		$	(0.86	)		$	(2.10	)		$	(4.04	)
Discontinued operations			0.22				0.53				5.74				0.53
Net income (loss) applicable to common shares		$	(0.80	)		$	(0.33	)		$	3.64			$	(3.51	)
Diluted earnings per share:
Income (loss) from continuing operations		$	(1.02	)		$	(0.86	)		$	(2.10	)		$	(4.04	)
Discontinued operations			0.22				0.53				5.74				0.53
Net income (loss) applicable to common shares		$	(0.80	)		$	(0.33	)		$	3.64			$	(3.51	)
Weighted average common share used in computing earnings per share			10,575,107				10,150,511				10,490,041				10,146,624
Weighted average common share used in computing diluted earnings per share			10,575,107				10,150,511				10,490,041				10,146,624

AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
		September 30,				December 31,
			2008				2007
		(dollars in thousands)
Assets
Real estate held for investment		$	1,696,179			$	1,508,815
Less - accumulated depreciation			(161,443	)			(148,404	)
			1,534,736				1,360,411
Real estate held for sale, net of depreciation			3,285				61,128
Real estate subject to sales contracts			57,201				64,320
Notes and interest receivable
Performing			71,140				69,977
Non-performing			17,951				16,468
			89,091				86,445
Less - allowance for estimated losses			(9,478	)			(2,978	)
			79,613				83,467
Cash and cash equivalents			3,199				11,560
Restricted cash			749				2,556
Marketable securities, at market value			1,405				13,157
Investments in equity investees			31,101				23,867
Other assets			116,021				157,388
		$	1,827,310			$	1,777,854
Liabilities and Shareholders’ Equity
Liabilities:
Notes and interest payable		$	1,295,162			$	1,221,987
Liabilities related to assets held-for-sale			4,884				116,377
Liabilities subject to sales contracts			60,848				62,513
Stock-secured notes payable			13,549				17,546
Accounts payable and other liabilities			126,233				104,884
			1,500,676				1,523,307
Commitments and contingencies
Minority interest			71,402				62,161
Shareholders’ equity:
Preferred Stock, $2.00 par value, authorized 15,000,000 shares, issued and outstanding Series A, 3,390,316 shares in 2008 and 2007 (liquidation preference $33,909), including 900,000 shares in 2008 and 2007 held by subsidiaries			4,979				4,979
Common Stock, $.01 par value, authorized 100,000,000 shares; issued 11,592,272 shares in 2008 and 2007.			114				114
Treasury stock at cost; 637,072 and 1,129,530 shares in 2008 and 2007, respectively.			(5,954	)			(12,664	)
Paid-in capital			115,416				100,277
Retained earnings			137,716				99,452
Accumulated other comprehensive income			2,961				228
			255,232				192,386
		$	1,827,310			$	1,777,854

American Realty Investors, Inc.
Investor Relations, 800-400-6407
investor.relations@primeasset.com