American Realty Investors, Inc. Reports Fourth Quarter 2007 Results

DALLAS--(Business Wire)--
American Realty Investors, Inc. (NYSE: ARL), a Dallas-based real
estate investment company, today reported net income for the year
ended December 31, 2007. The Company is aware of the challenges that
are currently facing the real estate industry. Despite these issues,
given the quality of the underlying assets and our attention to
details, management remains highly focused on its operations,
development projects and investment strategy.

ARI announced today that the Company reported net income
applicable to common shares of $24.1 million or $2.35 per diluted
share as compared to $10.6 million or $1.04 per diluted share for the
twelve months ended December 31, 2007 and 2006, respectively.

In addition, income applicable to common shares for the three
months ended December 31, 2007 was $60.6 million or $4.49 per diluted
share as compared to income applicable to common shares of $28.8
million or $2.20 per diluted share for the same period ended 2006.

Results for the year ended December 31, 2007:

Rents and other property revenues were $176.9 million in 2007 as
compared to $147.6 million in 2006 and an increase of $29.3 million. A
majority of the increase was due to revenues associated with the
acquisition of commercial (ParkWest I & II) in January of 2007.

Property operations expenses were $112.5 million in 2007 as
compared to $98.6 million in 2006, an increase of $13.9 million. A
majority of the increase was due to revenues associated with the
acquisition of commercial (ParkWest I & II) in January of 2007.

Depreciation and amortization expenses were $24.4 million in 2007
as compared to $21.9 million in 2006, an increase of $2.5 million.
Again, a majority of the increase was due to the acquisition of
ParkWest I & II.

General and administrative expenses were $15.9 million in 2007 as
compared to $9.3 million in 2006, an increase of $6.6 million. The
increase is due to higher legal and consulting fees in the current
year. In addition, the prior year amount includes credits for
litigation reimbursements of approximately $3.3 million.

Advisory fees to affiliate were $14.9 million in 2007 as compared
to $12.7 million in 2006, an increase of $2.2 million. The increase
was due to was due to higher gross assets in 2007 than 2006.

Gain on foreign currency translation was $2.4 million in 2007 as
compared to $2,000 in 2006, an increase of $2.4 million. The increase
was due to the currency translation associated with our hotel in
Poland.

Mortgage loan interest expenses were $89.8 million in 2007, as
compared to $67.9 million in 2006, an increase of $21.9 million. The
increase is due increase in debt due to refinancings, new loans on
acquisitions (mainly ParkWest I & II), and construction draws.

Gain on involuntary conversion of $34.7 million in 2007 and $20.5
million in 2006, represents the insurance proceeds related to
Hurricane Katrina.

In 2007, we took an impairment charge of $1.0 million to write
down the Executive Court and the Encon Warehouse.

In 2007, we paid $1.3 million in expense towards the settlement of
the Sunset litigation that were not previously accrued. There were no
significant litigation settlement expenses in 2006.

Gain on land sales was $20.5 million in 2007 as compared to $24.0
million in 2006. In 2007, we sold 252 acres of land in 18 separate
transactions with an aggregate sales price of $36.0 million. The
average sales price was $142,000 per acre. In 2006, we sold 317 acres
of land in 19 separate transactions for at an average sales price of
$195,000 per acre.

Net income from discontinued operations was $29.2 million in 2007
as compared $13.5 in 2006. For 2007 and 2006, income from discontinued
operations relates to 59 properties of which 20 were sold in 2006, 18
sold in 2007 and 21 were held for sale and subsequently sold in 2008.

Results for the quarter ended December 31, 2007:

Rents and other property revenues were $46.1 million for the
quarter ended December 31, 2007 as compared to $39.4 million for the
same period ended 2006. The increase was mainly due to our acquisition
of ParkWest I & II in January of 2007, along with the continued
lease-up of our developed property apartments. This also accounts for
our increased operating expenses of $43.2 million for the quarter
ended December 31, 2007 as compared to $37.8 for the same period ended
2006.

Other income was $11.1 million for the quarter ended December 31,
2007 as compared to $3.1 million for the same period ended 2006. A
majority of the increase is due to the receipt of the remaining
insurance proceeds related to hurricane Katrina, offset by an increase
in mortgage interest expense.

Gain on land sales for the quarter ended were $8.8 million for the
quarter ended December 31, 2007 as compared to $2.0 million for the
same period ended 2006. During the fourth quarter, we sold 140 acres
of land at a gross sales price of $11.9 million, receiving cash
proceeds of $6.5 million.

Income from discontinued operations was $25.9 million for the
quarter ended December 31, 2007 as compared to $13.2 million for the
same period in 2006. During the fourth quarter, we sold 5 apartments,
1 hotel, and 1 commercial building for a gross sales price of $80.3
million, receiving cash proceeds of $32.1 million. In addition,
subsequent to year end 21 properties were repositioned as held for
sale and included in income from discontinued operations.

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.

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AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2007
--------------------------------------
2007 2006 2005
------------ ------------ ------------
(dollars in thousands)
Revenues:
Rental and other property
revenues $ 176,930 $ 147,563 $ 123,147

Expenses:
Property operating expenses 112,454 98,649 82,638
Depreciation and amortization 24,430 21,949 17,421
General and administrative 15,966 9,321 14,040
Advisory fee to affiliate 14,898 12,678 9,336
------------ ------------ ------------
Total operating expenses 167,748 142,597 123,435
------------ ------------ ------------
Operating income (loss) 9,182 4,966 (288)

Other income (expense):
Interest income 6,156 6,000 5,439
Gain on foreign currency
transaction 2,368 2 292
Other income 8,406 6,181 2,652
Mortgage and loan interest (89,848) (67,904) (50,663)
Net income fee to affiliate 514 (972) (3,712)
Incentive fee to affiliate (5,599) (1,490) (1,128)
Discount on notes receivable - (1,170) (15)
Gain on involuntary
conversion 34,771 20,479 -
Provision for impairment (1,003) - -
Litigation settlement (1,354) 15 (130)
------------ ------------ ------------
Total other income
(expense) (45,589) (38,859) (47,265)
------------ ------------ ------------
Loss before gain on land sales,
minority interest, and equity
in earnings of investees (36,407) (33,893) (47,553)
Gain on land sales 20,468 23,973 39,926
Minority interest (2,652) 672 (3,056)
Equity in income (loss) of
investees 286 1,540 397
------------ ------------ ------------
Income (loss) from continuing
operations before income tax
benefit (18,305) (7,708) (10,286)
Income tax benefit (expense) 15,703 7,271 20,196
------------ ------------ ------------
Net income (loss) from
continuing operations (2,602) (437) 9,910
------------ ------------ ------------
Income from discontinued
operations before tax expense 44,867 20,774 57,703
Income tax benefit (expense) (15,703) (7,271) (20,196)
------------ ------------ ------------
Net income (loss) from
discontinuing operations 29,164 13,503 37,507
------------ ------------ ------------
Net income 26,562 13,066 47,417
Preferred dividend requirement (2,490) (2,491) (2,572)
------------ ------------ ------------
Net income applicable to common
shares $ 24,072 $ 10,575 $ 44,845
============ ============ ============

Earnings per share - basic
Income (loss) from continuing
operations $ (0.50) $ (0.29) $ 0.72
Discontinued operations 2.85 1.33 3.70
------------ ------------ ------------
Net income applicable to
common shares $ 2.35 $ 1.04 $ 4.42
============ ============ ============

Earnings per share - diluted
Income (loss) from continuing
operations $ (0.50) $ (0.29) $ 0.56
Discontinued operations 2.85 1.33 2.86
------------ ------------ ------------
Net income applicable to
common shares $ 2.35 $ 1.04 $ 3.42
============ ============ ============
Weighted average common share
used in computing earnings per
share 10,227,593 10,149,000 10,149,000
Weighted average common share
used in computing diluted
earnings per share 10,227,593 10,149,000 13,106,000
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AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
December December
31, 31,
2007 2006
----------- -----------
(dollars in thousands)
Assets
Real estate held for investment $1,508,815 $1,249,833
Less--accumulated depreciation (148,404) (178,029)
----------- -----------
1,360,411 1,071,804
Real estate held for sale, net of depreciation 61,128 134,593
Real estate subject to sales contracts 64,320 66,027
Notes and interest receivable
Performing 69,977 50,668
Non-performing 16,468 2,963
----------- -----------
86,445 53,631
Less--allowance for estimated losses (2,978) (1,000)
----------- -----------
83,467 52,631
Marketable securities, at market value 13,157 9,038
Cash and cash equivalents 11,560 7,035
Restricted cash 2,556 6,000
Investments in equity investees 23,867 25,056
Other assets 157,388 121,487
----------- -----------
$1,777,854 $1,493,671
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Notes and interest payable $1,221,987 $1,022,370
Liabilities related to assets held-for-sale 116,377 43,579
Liabilities subject to sales contracts 62,513 58,816
Stock-secured notes payable 17,546 22,452
Accounts payable and other liabilities 104,884 107,771
----------- -----------
1,523,307 1,254,988
Commitments and contingencies
Minority interest 62,161 78,194
Stockholders' equity
Preferred Stock, $2.00 par value, authorized
15,000,000 shares, issued and outstanding
Series A, 3,390,316 shares in 2007 and 2006
(liquidation preference $33,909), including
900,000 shares in 2007 and 2006 held by
subsidiaries 4,979 4,979
Common Stock, $.01 par value, authorized
100,000,000 shares; issued 11,592,272 shares
in 2007 and 2006 114 114
Treasury stock,at cost;1,129,530 and 1,443,272
shares in 2007 and 2006, respectively (12,664) (15,146)
Paid-in capital 100,277 93,378
Retained earnings 99,452 75,380
Accumulated other comprehensive income (loss) 228 1,784
----------- -----------
192,386 160,489
----------- -----------
$1,777,854 $1,493,671
=========== ===========
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American Realty Investors, Inc.
Investor Relations, 800-400-6407
investor.relations@primeasset.com

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