• Net income attributable to common shares decreased significantly to $3.0 million in Q3 2023 from $302.3 million in Q3 2022.

• Rental revenues rose by $4.3 million, driven by multifamily property acquisitions.

• Net operating loss improved, decreasing by $1.1 million compared to the same period last year.

• American Realty Investors Inc secured a $25.4 million construction loan for a new multifamily property project.

• Warning! GuruFocus has detected 1 Warning Sign with ARL.

On November 9, 2023, American Realty Investors Inc (NYSE:ARL) released its earnings report for the third quarter of 2023, revealing a significant decrease in net income attributable to common shares, which stood at $3.0 million or $0.18 per diluted share, compared to the substantial $302.3 million or $18.72 per diluted share reported in the same period of the previous year. This stark decline is primarily attributed to the gain from the sale of the VAA Sale Portfolio in 2022.

Financial Highlights and Results

The company's total occupancy rate was 79% at the end of the quarter, with multifamily properties performing strongly at 96% occupancy, while commercial properties lagged behind at 49%. Notably, American Realty Investors Inc paid off a $1.2 million loan on Athens and secured a $25.4 million construction loan for a new 216-unit multifamily property in McKinney, Texas.

Rental revenues increased by $4.3 million, from $7.6 million in Q3 2022 to $11.8 million in Q3 2023. This increase was primarily due to a $5.0 million rise in revenue from multifamily properties, which offset a $0.8 million decrease from commercial properties. The acquisition of the VAA Holdback Portfolio in 2022 played a significant role in boosting multifamily revenue.

Net operating loss saw an improvement, decreasing by $1.1 million from the previous year's $3.2 million to $2.1 million in the current quarter. This reduction in net operating loss is mainly due to decreased legal costs.

Income Statement Analysis

While total revenue for the quarter increased to $12.5 million, up from $8.3 million in the same quarter of the previous year, the company's operating expenses also saw a change. Property operating expenses rose to $7.4 million, depreciation and amortization increased to $3.3 million, and the advisory fee to a related party was $2.3 million. However, general and administrative expenses decreased from $3.0 million to $1.6 million, contributing to the reduced net operating loss.

Interest income was favorable at $9.0 million, an increase from $7.0 million in Q3 2022, while interest expense decreased from $4.0 million to $1.9 million. The equity in income from unconsolidated joint ventures was reported at $234,000, a significant decrease from the previous year's $464.1 million, which included the gain from the VAA Sale Portfolio.