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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to________
Commission File Number 001-09240

AMERICAN REALTY INVESTORS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada94-6565852
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
1603 Lyndon B. Johnson Freeway, Suite 800, Dallas, Texas 75234
(Address of principal executive offices) (Zip Code)
(469) 522-4200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockARLNYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ☐
Accelerated filer  ☐
Non-accelerated filer  ☒
Smaller reporting company   
Emerging growth Company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No.
As of August 12, 2022, there were 16,152,043 shares of common stock outstanding.



Table of Contents
AMERICAN REALTY INVESTORS, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE

2

Table of Contents
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS 
(dollars in thousands, except share and par value amounts)
(Unaudited)
June 30, 2022December 31, 2021
Assets
Real estate$283,696 $296,363 
Cash and cash equivalents38,236 50,748 
Restricted cash19,460 21,986 
Short-term investments7,883 16,001 
Notes receivable (including $76,937 and $75,872 at June 30, 2022 and December 31, 2021, respectively, from related parties)
139,725 136,607 
Investment in unconsolidated joint ventures59,251 61,621 
Receivable from related parties, net104,547 100,599 
Other assets (including $4,576 and $4,535 at June 30, 2022 and December 31, 2021, respectively, from related parties)
83,261 86,644 
Total assets$736,059 $770,569 
Liabilities and Equity
Liabilities:
Mortgages and other notes payable$168,160 $183,392 
Bonds payable148,834 189,452 
Accounts payable and other liabilities (including $599 and $616 at June 30, 2022 and December 31, 2021, respectively, to related parties)
32,267 44,518 
Accrued interest5,559 6,565 
Deferred revenue9,791 9,791 
Total liabilities364,611 433,718 
Equity
Shareholders' Equity:
Preferred stock, Series A, $2.00 par value, 15,000,000 shares authorized, 1,800,614 shares issued and outstanding
1,801 1,801 
Common stock, $0.01 par value, 100,000,000 shares authorized; 16,152,043 shares issued and outstanding
162 162 
Additional paid-in capital62,090 62,090 
Retained earnings203,711 176,085 
Total shareholders' equity267,764 240,138 
Noncontrolling interests103,684 96,713 
Total equity371,448 336,851 
Total liabilities and equity$736,059 $770,569 
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenues:
Rental revenues (including $223 and $313 for the three months ended June 30, 2022 and 2021, respectively, and $479 and $555 for six months ended June 30, 2022 and 2021, respectively, from related parties)
$7,259 $10,194 $14,740 $20,555 
Other income870 909 1,176 2,376 
   Total revenue8,129 11,103 15,916 22,931 
Expenses:
Property operating expenses (including $110 and $195 for the three months ended June 30, 2022 and 2021, respectively, and $227 and $577 for six months ended June 30, 2022 and 2021, respectively, from related parties)
3,812 5,058 7,840 10,890 
Depreciation and amortization2,298 3,211 4,647 6,538 
General and administrative (including $690 and $747 for the three months ended June 30, 2022 and 2021, respectively, and $2,080 and $2,417 for six months ended June 30, 2022 and 2021, respectively, from related parties)
2,194 5,866 4,914 9,101 
Advisory fee to related party2,858 5,739 6,043 8,175 
   Total operating expenses11,162 19,874 23,444 34,704 
   Net operating loss(3,033)(8,771)(7,528)(11,773)
Interest income (including $5,403 and $5,062 for the three months ended June 30, 2022 and 2021, respectively, and $6,043 and $9,831 for the six months ended June 30, 2022 and 2021, respectively, from related parties)
9,419 5,616 16,201 11,260 
Interest expense (including $1,794 and $1,373 for the three months ended June 30, 2022 and 2021, respectively, and $3,299 and $2,768 for the six months ended June 30, 2022 and 2021, respectively, from related parties)
(6,389)(7,681)(12,556)(15,419)
Gain (loss) on foreign currency transactions14,132 (4,793)17,904 2,824 
Loss on extinguishment of debt  (1,639) 
Equity in income from unconsolidated joint ventures2,048 4,572 7,242 7,908 
Gain (loss) on sale or write-down of assets, net3,893 (24,445)15,041 (7,047)
Income tax provision(40)1,841 (68)1,801 
Net income (loss)20,030 (33,661)34,597 (10,446)
Net (income) loss attributable to noncontrolling interests(3,718)6,333 (6,971)1,186 
Net income (loss) attributable to the Company$16,312 $(27,328)$27,626 $(9,260)
Earnings per share - basic and diluted$1.01 $(1.69)$1.71 $(0.57)
Weighted average common shares used in computing earnings per share16,152,043 16,152,043 16,152,043 16,152,043 
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(dollars in thousands)
(Unaudited)

Preferred StockCommon StockTreasury
Stock
Paid-in
Capital
Retained
Earnings
Total Shareholders' EquityNoncontrolling
Interest
Total Equity
Three Months Ended June 30, 2022
Balance, April 1, 2022$1,801 $162 $ $62,090 $187,399 $251,452 $99,966 $351,418 
Net income— — — — 16,312 16,312 3,718 20,030 
Balance, June 30, 2022$1,801 $162 $ $62,090 $203,711 $267,764 $103,684 $371,448 
Three Months Ended June 30, 2021
Balance, April 1, 2021$1,801 $162 $ $62,090 $190,806 $254,859 $98,762 $353,621 
Net loss— — — — (27,328)(27,328)(6,333)(33,661)
Balance, June 30, 2021$1,801 $162 $ $62,090 $163,478 $227,531 $92,429 $319,960 
Six Months Ended June 30, 2022
Balance, January 1, 2022$1,801 $162  62,090 176,085 $240,138 $96,713 $336,851 
Net income— — — — 27,626 27,626 6,971 34,597 
Balance, June 30, 2022$1,801 $162 $ $62,090 $203,711 $267,764 $103,684 $371,448 
Six Months Ended June 30, 2021
Balance, January 1, 2021$1,801 $162 $(2)$62,092 $172,738 $236,791 $93,615 $330,406 
Net loss— — — — (9,260)(9,260)(1,186)(10,446)
Cancellation of treasury shares— — 2 (2)— — —  
Balance, June 30, 2021$1,801 $162 $ $62,090 $163,478 $227,531 $92,429 $319,960 
The accompanying notes are an integral part of these consolidated financial statements.
5

Table of Contents
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
Six Months Ended June 30,
20222021
Cash Flow From Operating Activities:
Net income (loss)$34,597 $(10,446)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
(Gain) loss on sale or write down of assets(15,041)7,047 
Gain on foreign currency transactions(17,904)(2,824)
Loss on extinguishment of debt1,639  
Depreciation and amortization6,363 7,755 
Recovery of bad debts(3,403)(1,326)
Equity in income from unconsolidated joint ventures(7,242)(7,908)
Distribution of income from unconsolidated joint ventures1,100 3,157 
Changes in assets and liabilities, net of dispositions:
Other assets2,553 (8,850)
Related party receivables(3,948)14,128 
Accrued interest payable(2,459)(908)
Accounts payable and other liabilities(5,248)87 
Net cash used in operating activities(8,993)(88)
Cash Flow From Investing Activities:
Collection of notes receivable1,295 9,319 
Originations and advances on notes receivable(989)(3,504)
Purchase of short-term investment(31,500) 
Redemption of short-term investment39,750  
Development and renovation of real estate(8,215)(6,990)
Deferred leasing costs(922)(755)
Proceeds from sale of assets32,875 24,440 
Contribution to unconsolidated joint venture (411)
Distribution from unconsolidated joint venture1,500 7,430 
Net cash provided by investing activities33,794 29,529 
Cash Flow From Financing Activities:
Payments on mortgages, other notes and bonds payable(39,249)(48,431)
Debt extinguishment costs(590) 
Deferred financing costs (22)
Net cash used in financing activities(39,839)(48,453)
Net decrease in cash, cash equivalents and restricted cash(15,038)(19,012)
Cash, cash equivalents and restricted cash, beginning of period72,734 87,020 
Cash, cash equivalents and restricted cash, end of period$57,696 $68,008 
The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)

1.    Organization
As used herein, the terms “the Company”, “we”, “our” or “us” refer to American Realty Investors, Inc., a Nevada corporation, which was formed in 1999. Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol (“ARL”) and over 90% of our stock is owned by related party entities.
Our primary business is the acquisition, development and ownership of income-producing multifamily and commercial properties. In addition, we opportunistically acquire land for future development in in-fill or high-growth suburban markets. From time to time and when we believe it appropriate to do so, we will sell land and income-producing properties. We generate revenues by leasing apartment units to residents, and leasing office, industrial and retail space to various for-profit businesses as well as certain local, state and federal agencies. We also generate income from the sale of land.
We own approximately 78.4% of Transcontinental Realty Investors, Inc. ("TCI") and substantially all of our operations are conducted through TCI, whose common stock is traded on the NYSE under the symbol “TCI”. Accordingly, we include TCI’s financial results in our consolidated financial statements. Substantially all of TCI's assets are held by its wholly-owned subsidiary, Southern Properties Capital Ltd. (“SPC”), which was formed for the purpose of raising funds by issuing non-convertible bonds that are listed on the Tel-Aviv Stock Exchange ("TASE").
At June 30, 2022, our portfolio of properties consisted of:
●     Four office buildings comprising in aggregate of approximately 1,056,793 square feet;
●    Eight multifamily properties, owned directly by us, comprising of 1,252 units;
●    Approximately 1,847 acres of developed and undeveloped land; and
●    Fifty-two multifamily properties, totaling 10,281 units, owned by our joint venture.
Our day to day operations are managed by Pillar Income Asset Management, Inc. (“Pillar”). Their duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities and arranging debt and equity financing with third party lenders and investors. All of our employees are Pillar employees. Three of our commercial properties are managed by Regis Realty Prime, LLC (“Regis”). Regis provides leasing, construction management and brokerage services. Our multifamily properties are managed by outside management companies. Pillar and Regis are considered to be related parties (See Note 13 – Related Party Transactions).
2.    Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.
The consolidated balance sheet at December 31, 2021 was derived from the audited consolidated financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. Certain 2021 consolidated financial statement amounts have been reclassified to conform to the current presentation.

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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
We consolidate entities in which we are considered to be the primary beneficiary of a variable interest entity (“VIE”) or have a majority of the voting interest of the entity. We have determined that we are a primary beneficiary of the VIE when we have (i) the power to direct the activities of a VIE that most significantly impacts its economic performance, and (ii) the obligations to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether we are the primary beneficiary, we consider qualitative and quantitative factors, including ownership interest, management representation, ability to control decision and other contractual rights.
We account for entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary under the equity method of accounting. Accordingly, we include our share of the net earnings or losses of these entities in our results of operations.
Newly Issued Accounting Standards
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard provides guidance, optional expedients and exceptions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The adoption of the standard on January 1, 2022, did not have an impact on our consolidated financial statements.
3.    Earnings Per Share
Earnings Per Share (“EPS”) is computed by dividing net income (loss) available to common shares by the weighted-average number of common shares outstanding during the period. Shares issued during the period are weighted for the portion of the period that they were outstanding.
The following table details our basic and diluted earnings per common share calculation:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net income (loss)$20,030 $(33,661)$34,597 $(10,446)
Net (income) loss attributable to noncontrolling interests(3,718)6,333 (6,971)1,186 
Net income (loss) attributable to common shares$16,312 $(27,328)$27,626 $(9,260)
Weighted-average common shares outstanding — basic and diluted16,152,043 16,152,043 16,152,043 16,152,043 
EPS - attributable to common shares — basic and diluted$1.01 $(1.69)$1.71 $(0.57)

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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
4.    Supplemental Cash Flow Information
The following presents the schedule of interest paid and other supplemental cash flow information:
Six Months Ended June 30,
20222021
Cash paid for interest$12,457 $17,016 
Cash - beginning of period
Cash and cash equivalents$50,748 $36,814 
Restricted cash21,986 50,206 
$72,734 $87,020 
Cash - end of period
Cash and cash equivalents$38,236 $46,009 
Restricted cash19,460 21,999 
$57,696 $68,008 
Payments on mortgages, notes and bonds payable
Payments on mortgages and notes payable$16,327 $16,029 
Payments on bonds payable22,922 32,402 
$39,249 $48,431 
The following is a schedule of noncash investing and financing activities:
Six Months Ended June 30,
20222021
Assets contributed to joint venture$ $18,608 
Liabilities assumed by joint venture$ $15,606 
Notes receivable received in exchange for related party receivable$ $9,259 
Distribution from joint venture applied to Earn Out Obligation$7,012 $ 
5.    Operating Segments
Our segments are based on the internal reporting that we review for operational decision-making purposes. We operate in two reportable segments: (i) the acquisition, development, ownership and management of multifamily properties and (ii) the acquisition, ownership and management of commercial properties. The services for our multifamily segment include rental of apartments and other tenant services, including parking and storage space rental. Asset information by segment is not reported because we do not use this measure to assess performance or make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated among segments. General and administrative expenses, advisory fees, interest income and interest expense are not included in segment profit as our internal reporting addresses these items on a corporate level.

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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
The following table presents our reportable segments for the three and six months ended June 30, 2022 and 2021:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Multifamily Segment
Revenues$2,945 $3,529 $6,174 $7,365 
Operating expenses(1,708)(2,111)(3,429)(4,234)
Profit from segment1,237 1,418 2,745 3,131 
Commercial Segment
Revenues4,314 6,665 8,566 13,190 
Operating expenses(2,104)(2,947)(4,411)(6,656)
Profit from segment2,210 3,718 4,155 6,534 
Total profit from segments$3,447 $5,136 $6,900 $9,665 
The table below reflects the reconciliation of total profit from segments to net income for the three and six months ended June 30, 2022 and 2021:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Total profit from segments$3,447 $5,136 $6,900 $9,665 
Other non-segment items of income (expense)
Depreciation and amortization(2,298)(3,211)(4,647)(6,538)
General and administrative(2,194)(5,866)(4,914)(9,101)
Advisory fee to related party(2,858)(5,739)(6,043)(8,175)
Other income870 909 1,176 2,376 
Interest income9,419 5,616 16,201 11,260 
Interest expense(6,389)(7,681)(12,556)(15,419)
Gain (loss) on foreign currency transaction14,132 (4,793)17,904 2,824 
Loss on extinguishment of debt  (1,639) 
Income from unconsolidated joint ventures2,048 4,572 7,242 7,908 
Gain (loss) on sales or write-down of assets3,893 (24,445)15,041 (7,047)
Income tax provision(40)1,841 (68)1,801 
Net income (loss)$20,030 $(33,661)$34,597 $(10,446)
6.    Lease Revenue
We lease our multifamily properties and commercial properties under agreements that are classified as operating leases. Our multifamily property leases generally includes minimum rents and charges for ancillary services. Our commercial property leases generally included minimum rents and recoveries for property taxes and common area maintenance. Minimum rental revenues are recognized on a straight-line basis over the terms of the related leases.

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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
The following table summarizes the components of our rental revenue for the three and six months ended June 30, 2022 and 2021:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Fixed component$6,881 $9,300 $13,877 $19,163 
Variable component378 894 863 1,392 
$7,259 $10,194 $14,740 $20,555 
The following table summarizes the future rental payments that are payable to us from non-cancelable leases. The table excludes multifamily leases, which typically have a term of one-year or less:
2022$13,200 
20239,384 
20247,642 
20257,343 
20267,219 
Thereafter23,000 
$67,788 
7.    Real Estate Activity
Below is a summary of our real estate as of June 30, 2022 and December 31, 2021:
June 30, 2022December 31, 2021
Land$65,421 $67,514 
Building and improvements201,998 219,327 
Tenant improvements25,123 21,364 
Construction in progress53,024 51,091 
   Total cost345,566 359,296 
Less accumulated depreciation(61,870)(62,933)
Total real estate$283,696 $296,363 
Construction in progress represents our investment in Windmill Farms.
Gain (loss) on sale or write-down of assets, net for the three and six months ended June 30, 2022 and 2021 consists of the following:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Land(1)$2,763 $5,155 $4,752 $11,112 
Multifamily Properties(2)  9,603 11,441 
Commercial Properties890  890  
Other(3)240 (29,600)(204)(29,600)
$3,893 $(24,445)$15,041 $(7,047)

(1)Includes the gain on the sale of lots related to our investment in Windmill Farms, Mercer Crossing and other land holdings.
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
(2)On January 14, 2022, we sold Toulon, a 240 unit multifamily property in Gautier, Mississippi for $26,750, resulting in gain on sale of $9,364. We used the proceeds to pay off the $14,740 mortgage note payable on the property and for general corporate purposes. The 2021 amount is attributed to the gain from the sale of a 50% ownership interest in Overlook at Allensville Phase II to Macquarie in 2021 (See Note 10 – Investment in Unconsolidated Joint Ventures) and the gain on sale of various multifamily properties that had previously been deferred (See Note 15 – Deferred Income).
(3)The 2021 amount represents a $29,600 loss on remeasurement of the Earn Out Obligation in connection with our investment in VAA (See Note 10 - Investment in Unconsolidated Joint Ventures).
8.    Short-term Investments
We have an investment in variable denominated floating rate notes with Toyota Motor Credit Corporation. The notes do not have a stated maturity and are subject to immediate repayment at our option. The interest rate on the note was 1.75% and 1.15% at June 30, 2022 and December 31, 2021, respectively.
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
9.    Notes Receivable
The following table summarizes our notes receivable as of June 30, 2022 and December 31, 2021:
Carrying value
Property/BorrowerJune 30, 2022December 31, 2021Interest RateMaturity Date
ABC Land and Development, Inc.$4,408 $4,408 9.50 %6/30/26
ABC Paradise, LLC1,210 1,210 9.50 %6/30/26
Autumn Breeze(1)2,626 2,486 5.00 %7/1/25
Bellwether Ridge(1)3,973 3,967 5.00 %11/1/26
Forest Pines(1)6,472 6,472 5.00 %11/1/22
Lake Wales3,000 3,000 9.50 %6/30/26
Legacy Pleasant Grove496 496 12.00 %10/23/22
McKinney Ranch3,926 4,554 6.00 %9/15/22
One Realco Land Holding, Inc.1,728 1,728 9.50 %6/30/26
Parc at Ingleside(1)3,663 3,700 5.00 %11/1/26
Parc at Opelika Phase II(1)2,914 2,305 10.00 %1/13/23
Parc at Windmill Farms(1)7,836 7,830 5.00 %11/1/22
Phillips Foundation for Better Living, Inc.(2)182 813 12.00 %3/31/24
Plum Tree(1)1,767 1,537 5.00 %4/26/26
Riverview on the Park Land, LLC1,045 1,045 9.50 %6/30/26
Spartan Land5,907 5,907 12.00 %1/16/23
Spyglass of Ennis(1)5,319 5,319 5.00 %11/1/22
Steeple Crest(1)6,498 6,498 5.00 %8/1/26
Unified Housing Foundation(2)(3)2,881 2,881 12.00 %6/30/23
Unified Housing Foundation(2)(3)212 212 12.00 %6/30/23
Unified Housing Foundation(2)(3)6,831 6,831 12.00 %6/30/23
Unified Housing Foundation(2)(3)10,401 10,401 12.00 %6/30/23
Unified Housing Foundation(2)(3)10,096 10,096 12.00 %3/31/24
Unified Housing Foundation(2)(3)6,990 6,990 12.00 %3/31/23
Unified Housing Foundation(2)(3)3,615 3,615 12.00 %5/31/23
Unified Housing Foundation(2)(3)27,477 24,053 12.00 %12/31/32
Unified Housing Foundation(2)(3)6,521 6,521 12.00 %3/31/24
Unified Housing Foundation(2)(3)1,549 1,549 12.00 %4/30/24
Unified Housing Foundation(2)(3)182 183 12.00 %6/30/24
$139,725 $136,607 
(1)The note is convertible, at our option, into a 100% ownership interest in the underlying development property, and is collateralized by the underlying development property.
(2) The borrower is determined to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable.
(3) Principal and interest payments on the notes from Unified Housing Foundation, Inc. (“UHF”) are funded from surplus cash flow from operations, sale or refinancing of the underlying properties and are cross collateralized to the extent that any surplus cash available from any of the properties underlying the notes.
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
10.    Investment in Unconsolidated Joint Ventures
On November 16, 2018, we formed Victory Abode Apartments, LLC ("VAA"), a joint venture with the Macquarie Group (“Macquarie”). VAA was formed as a result of a sale of the 50% ownership interest in 51 multifamily properties owned by us in exchange for a 50% voting interest / 49% profit participation interest ("Class A interest") in VAA and a note payable (“Mezzanine Loan”). Concurrent with the Contribution, VAA issued Class B interests with a 2% profits participation interest and no voting rights to Daniel J. Moos, our former President and Chief Executive Officer (“Class B Member”). The Class B Member serves as the Manager of VAA.
Interest on the Mezzanine loan is limited to cash generated from the properties and matures concurrently with the termination of VAA. Accordingly, we account for our interest in the Mezzanine Loan as additional equity interest and include any interest payments accrued as income from unconsolidated joint ventures. In connection with the formation of VAA, ten of the initial properties were subject to an earn-out provision ("Earn Out") that provided for a remeasurement of value after a two-year period following the completion of construction. Upon the formation of VAA, we recorded an initial liability ("Earn Out Obligation") for the $10,000 advance on the Earn Out that we received from Macquarie.
On March 30, 2021, we sold a 50% ownership interest in Overlook at Allensville Phase II, a 144 unit multifamily property in Sevierville, Tennessee to Macquarie for $2,551 resulting in gain on sale of $1,417. Concurrent with the sale, we each contributed our 50% ownership interests in Overlook at Allensville Phase II into VAA.
On July 13, 2021, we received the arbitration result of a dispute regarding the measurement of the Earn Out Obligation. Our position and claims were declined, and the position of Macquarie was fully accepted. As a result, we are required to pay approximately $39,600 to Macquarie to satisfy the Earn Out Obligation, and therefore, recorded a charge of $29,600 during the three and six months ended June 30, 2022 (See Note 7 – Real Estate Activity). In accordance with the joint venture operating agreement, the Earn Out Obligation will be paid from our share of future distributions from VAA, which generally occur each six months. At June 30, 2022, we owed $27,147 under the Earn Out Obligation. On July 16, 2022, our $10,178 distribution from VAA was paid directly to Macquarie as an additional reduction of the Earn Out Obligation.
On November 17, 2021, we entered into an agreement with Macquarie to pursue a sale of forty-five properties ("Sale Portfolio") owned by VAA in accordance with the provisions of the joint venture agreement. The parties further agreed that we would be able to acquire the remaining seven of the properties (“Holdback Properties”) from VAA at an agreed upon market price.
On June 17, 2022, VAA entered into an agreement (“PSA”) to sell Sale Portfolio to two private equity funds (collectively, the “Buyer”) for $1,825,000. In connection with the transaction, we plan to sell Sugar Mill Phase III to the Buyer. The PSA provides for an inspection period in which the Buyer may decrease the number of properties acquired by up to five properties. In connection with the PSA, the Buyer deposited $50,000 into escrow. The sale is expected to be completed in the third quarter of 2022. VAA intends to distribute the net proceeds and the Holdback Properties to the Members immediately following the completion of the sale.
We also own a 20% ownership interest in a 20% interest in Gruppa Florentina, LLC ("Milano"), which operates several pizza parlors in Central and Northern California. Milano also has 23 franchised locations, including two operating, under the trade name Angelo & Vito’s Pizzerias.
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
The following is a summary of our investment in unconsolidated joint ventures:
June 30, 2022December 31, 2021
Assets (1)
Assets held for sale$1,119,125 $1,135,769 
Real estate142,481 142,629 
Other assets62,686 69,457 
   Total assets$1,324,292 $1,347,855 
Liabilities and Partners' Capital (1)
Liabilities on assets held for sale$796,076 $807,382 
Mortgage notes payable86,478 83,955 
Mezzanine notes payable238,952 242,942 
Other liabilities34,512 25,970 
Our share of partners' capital73,623 80,602 
Outside partner's capital94,651 107,004 
   Total liabilities and partners' capital$1,324,292 $1,347,855 
Investment in unconsolidated joint ventures
Our share of partners' capital$73,623 $80,602 
Our share of Mezzanine note payable123,512 125,306 
Basis adjustment (2)(137,884)(144,287)
   Total investment in unconsolidated joint ventures$59,251 $61,621 
(1)    These amounts include the assets of VAA of $1,261,647 and $1,280,867 at June 30, 2022 and December 31, 2021, respectively, and liabilities of VAA of $332,353 and $329,891 at June 30, 2022 and December 31, 2021, respectively.
(2)     We amortize the difference between the cost of our investments in unconsolidated joint ventures and the book value of our underlying equity into income on a straight-line basis consistent with the lives of the underlying assets.
The following is a summary of income from our investments in unconsolidated joint ventures:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue (1)
   Rental revenue$4,032 $3,613 $7,963 $7,135 
   Other revenue15,901 15,842 25,702 29,673 
      Total revenue19,933 19,455 33,665 36,808 
Expenses (2)
   Operating expenses25,060 16,385 36,531 30,818 
   Depreciation and amortization1,134 1,199 2,322 2,398 
   Interest6,253 5,999 12,028 11,937 
      Total expenses32,447 23,583 50,881 45,153 
Loss from continuing operations(12,514)(4,128)(17,216)(8,345)
Income from discontinued operations4,512 686 7,948 3,342 
Net loss$(8,002)$(3,442)$(9,268)$(5,003)
Equity in the income in unconsolidated joint ventures$2,048 $4,572 $7,242 $7,908 
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
(1)    These amounts include revenue of VAA of $4,268 and $3,802 for the three months ended June 30, 2022 and 2021, respectively, and $8,341 and $7,481 during the six months ended June 30, 2022 and 2021, respectively.
(2)    These amounts include expenses of VAA of $17,486 and $9,246 for the three months ended June 30, 2022 and 2021, respectively, and $26,665 and $17,997 during the six months ended June 30, 2022 and 2021, respectively.
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
11.    Mortgages and Other Notes Payable
The following table summarizes our mortgages and other notes payable as of June 30, 2022 and December 31, 2021:
Carrying value
Property / EntityJune 30, 2022December 31, 2021Effective
Interest Rate
Maturity Date
770 South Post Oak11,541 11,635 4.40 %6/1/2025
Athens1,155 1,155 4.00 %8/28/2022
Chelsea7,957 8,037 3.40 %12/1/2050
EQK Portage - Land3,350 3,350 10.00 %11/13/2024
Forest Grove7,195 7,263 3.75 %5/5/2024
Landing Bayou14,285 14,407 3.50 %9/1/2053
Legacy at Pleasant Grove13,197 13,352 3.60 %4/1/2048
New Concept Energy3,542 3,542 6.00 %9/30/2023
Parc at Denham Springs Phase II15,876 15,962 4.10 %2/1/2060
RCM HC Enterprises5,086 5,086 5.00 %12/31/2022
Stanford Center(1)38,706 38,979 6.00 %2/26/2023
Sugar Mill Phase III9,174 9,216 4.50 %2/1/2060
Toulon(2) 13,697 3.20 %12/1/2051
Villas at Bon Secour19,501 19,492 3.08 %9/1/2031
Vista Ridge9,753 9,830 4.00 %8/1/2053
Windmill Farms7,842 8,389 5.00 %2/28/2023
$168,160 $183,392 
(1)     On March 3, 2022, the loan was extended to February 26, 2023.
(2)    On January 14, 2022, the loan was paid off in connection with the sale of the underlying property (See Note 7 - Real Estate Activity).
Interest payable at June 30, 2022 and December 31, 2021, was $1,785 and $1,147, respectively. We capitalized interest of $800 and $1,009 for the three months ended June 30, 2022 and 2021, respectively, and $1,603 and $1,867 during the six months ended June 30, 2022 and 2021, respectively.
As of June 30, 2022, we were in compliance with all of our loan covenants except for the minimum debt service coverage ratio (“DSCR”) for the loan on 770 South Post Oak. As a result, the lender requires us to lock the surplus cash flow of the property (“Cash Trap”) into a designated deposit account controlled by them, until we are in compliance with the DSCR for a period of two consecutive quarters.
All of the above mortgages and other notes payable are collateralized by the underlying property. In addition, we have guaranteed the loans on Athens, Forest Grove, Stanford Center and Villas at Bon Secour.
There are various land mortgages, secured by the property, that are in the process of a modification or extension to the original note due to expiration of the loan. We are working with our existing lenders and new lenders to modify, extend the loans before they become due or refinancing the loans with terms that are similar to the existing agreement.
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
12.    Bonds Payable
We have issued three series of nonconvertible bonds ("Bonds") through SPC, which are traded on the TASE. The Bonds are denominated in New Israeli Shekels ("NIS") and provide for semiannual principal and interest payments through maturity. The Bonds are subject to a number of covenants, which include restrictions on the distribution of cash from SPC.
In connection with the Bonds, we incurred a gain (loss) on foreign currency transactions of $14,132 and $(4,793) for the three months ended June 30, 2022 and 2021, respectively, and $17,904 and $2,824 for the six months ended June 30, 2022 and 2021, respectively.
The outstanding balance of our Bonds at June 30, 2022 and December 31, 2021 is as follows:
Bond IssuanceJune 30, 2022December 31, 2021Interest RateMaturity
Series A Bonds(1)$43,694 $65,563 7.30 %7/31/23
Series B Bonds(1)42,000 54,019 6.80 %7/31/25
Series C Bonds(2)66,907 75,298 4.65 %1/31/23
152,601 194,880 
Less unamortized deferred issuance costs(3,767)(5,428)
$148,834 $189,452 
(1)    The bonds are collateralized by the assets of SPC.
(2)    The bonds are collateralized by a trust deed on Browning Place, a 625,297 square foot office building in Farmers Branch, Texas.
13.    Related Party Transactions
We engage in certain services and business transactions with related parties, including but not limited to, the rent of office space, leasing services, asset management, administrative services, and the acquisition and dispositions of real estate. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to, or in our best interest.
Pillar and Regis are wholly owned by an affiliates of Realty Advisors, Inc. ("RAI"), which owns approximately 90.8% of the Company. Pillar is compensated for advisory services in accordance with an agreement. Regis receives property management fees and leasing commissions in accordance with the terms of its property-level management agreement. In addition, Regis is entitled to receive real estate brokerage commissions in accordance with the terms of a non-exclusive brokerage agreement.
Rental income includes $223 and $313 for the three months ended June 30, 2022 and 2021, respectively, and $479 and $555 for the six months ended June 30, 2022 and 2021, respectively, for office space leased to Pillar and Regis.
Property operating expense includes $110 and $195 for the three months ended June 30, 2022 and 2021, respectively, and $227 and $577 for the six months ended June 30, 2022 and 2021, respectively, for management fees on commercial properties payable to Regis.
General and administrative expense includes $690 and $747 for the three months ended June 30, 2022 and 2021, respectively, and $2,080 and $2,417 for the six months ended June 30, 2022 and 2021, respectively, for employee compensation and other reimbursable costs payable to Pillar.
Advisor fees paid to Pillar were $2,858 and $5,739 for the three months ended June 30, 2022 and 2021, respectively, and $6,043 and $8,175 for the six months ended June 30, 2022 and 2021, respectively.
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
Notes receivable include amounts held by UHF and Pillar (See Note 9 – Notes Receivable). UHF is deemed to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable. In addition, we have receivables from related parties. Interest income on these notes and related party receivables was $5,403 and $5,062 for the three months ended June 30, 2022 and 2021, respectively, and $10,293 and $9,831 for the six months ended June 30, 2022 and 2021, respectively.
Interest expense on payables to Pillar was $1,794 and $1,373 for the three months ended June 30, 2022 and 2021, respectively, and $3,299 and $2,768 for the six months ended June 30, 2022 and 2021, respectively.
Receivable from related party, net represents the net amount outstanding from Pillar for loans and unreimbursed fees, expenses and costs as provided above.
14. Noncontrolling Interests
The noncontrolling interest represents the third party ownership interest in TCI and Income Opportunity Realty Investors, Inc. ("IOR"). We owned 78.4% of TCI, which in turn owned 81.1% of IOR during the three and six months ended June 30, 2022 and 2021.
15. Deferred Income
In previous years, we sold properties to related parties at a gain and therefore the sales criteria for the full accrual method was not met, and as such we deferred the gain recognition and accounted for the sales by applying the finance, deposit, installment or cost recovery methods, as appropriate. The gain on these transactions is deferred until the properties are sold to a non-related third party.
On January 29, 2021, UHF sold El Dorado, a 208 unit multifamily property in McKinney, Texas; Limestone Ranch, a 252 unit multifamily property in Lewisville, Texas; and Marquis, a 276 unit multifamily property in Lewisville, Texas to a non-related third party. As a result of this sale, we recognized a gain of $10,026 during the six months ended June 30, 2022 that had previously been deferred.
As of June 30, 2022 and December 31, 2021, we had deferred gain of $9,791.
16. Income Taxes
We are part of a tax sharing and compensating agreement with respect to federal income taxes with TCI and IOR. In accordance with the agreement, our expense (benefit) in each year is calculated based on the amount of losses absorbed by taxable income multiplied by the maximum statutory tax rate of 21%.
The following table summarizes our income tax provision:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Current$40 $(1,841)$68 $(1,801)
Deferred    
$40 $(1,841)$68 $(1,801)
17. Commitments and Contingencies
We believe that we will generate excess cash from property operations in the next twelve months; such excess, however, might not be sufficient to discharge all of our obligations as they become due. We intend to sell income-producing assets, refinance real estate and obtain additional borrowings primarily secured by real estate to meet our liquidity requirements.
We were a defendant in litigation with David Clapper and related entities (collectively, "Clapper”) regarding a multifamily property transaction that occurred in 1988. The litigation led to a substantial judgment against our affiliate and Clapper subsequently sued numerous other entities, including us,in Federal Court to collect that judgment. The case was tried to a jury
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
in May 2021. The jury found the defendants owed Clapper nothing and the Court issued a take nothing judgment. Clapper subsequently filed an appeal to the US Fifth Circuit Court of Appeals.
In February 2019, Paul Berger ("Berger") filed suit against us and others that alleged that our subsidiary IOR completed improper sales and/or transfers of property. Berger sought to proceed derivatively and directly, requests a payoff of various related party loans to IOR and that IOR then distribute the funds to its stockholders. After discovery and motions to dismiss substantial portions of the complaint, on June 28, 2022, Plaintiff Berger sought to voluntarily dismiss the action for reasons stated in the motion. The parties have not entered into any settlement, and neither Berger nor their counsel has received any consideration for the voluntary dismissal. The parties, through counsel, have stipulated to the dismissal with prejudice. On June 29, 2022, the United States District Court ordered that notice of the dismissal be provided to IOR shareholders. A copy of the required notice was filed as an exhibit to a Form 8-K of IOR for event occurring June 29, 2022 (the date of the Court’s order), and on July 7, 2022, a copy of the required notice was posted on IOR’s website. If no action is taken by one or more other stockholders of IOR prior to August 19, 2022, the Court may enter an order dismissing the Berger case with prejudice.
18 Subsequent Events
The date to which events occurring after June 30, 2022, the date of the most recent balance sheet, have been evaluated for possible adjustment to the consolidated financial statements or disclosure is August 12, 2022, which is the date on which the consolidated financial statements were available to be issued.
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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis by management should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and Notes included in this Quarterly Report on Form 10-Q (the “Quarterly Report”) and in our Form 10-K for the year ended December 31, 2021 (the “Annual Report”).
This Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, principally, but not only, under the captions “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. We caution investors that any forward-looking statements in this report, or which management may make orally or in writing from time to time, are based on management’s beliefs and on assumptions made by, and information currently available to, management. When used, the words “anticipate”, “believe”, “expect”, “intend”, “may”, “might”, “plan”, “estimate”, “project”, “should”, “will”, “result” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you that, while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.
Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on tenants’ financial condition, and competition from other developers, owners and operators of real estate);
risks associated with the availability and terms of construction and mortgage financing and the use of debt to fund acquisitions and developments;
demand for apartments and commercial properties in our markets and the effect on occupancy and rental rates;
our ability to obtain financing, enter into joint venture arrangements in relation to or self-fund the development or acquisition of properties;
risks associated with the timing and amount of property sales and the resulting gains/losses associated with such sales;
failure to manage effectively our growth and expansion into new markets or to integrate acquisitions successfully
risks and uncertainties affecting property development and construction (including, without limitation, construction delays, cost overruns, inability to obtain necessary permits and public opposition to such activities);
risks associated with downturns in the national and local economies, increases in interest rates, and volatility in the securities markets;
costs of compliance with the Americans with Disabilities Act and other similar laws and regulations;
potential liability for uninsured losses and environmental contamination;
risks associated with our dependence on key personnel whose continued service is not guaranteed; and
the other risk factors identified in this Form 10-Q, including those described under the caption “Risk Factors.”
The risks included here are not exhaustive. Some of the risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements, include among others, the factors listed and described at Part I, Item 1A. “Risk Factors” Annual Report on Form 10-K, which investors should review.
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We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and our property portfolio. While we did not incur significant disruptions during the six months ended June 30, 2022 from the COVID-19 pandemic, our commercial properties have experienced a decline in occupancy. We believe this decline to be temporary and do not expect a significant decrease in rental revenue.
We are unable to predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. The pandemic continues to have an impact on the U.S. economy and on the local markets in which our properties are located. Nearly every industry has been impacted directly or indirectly, and the commercial real estate market has come under pressure due to numerous factors, including preventative measures taken by local, state and federal authorities to alleviate the public health crisis such as mandatory business closures, quarantines, and restrictions on travel and “shelter-in-place” or “stay-at-home” orders.
Management's Overview
We are an externally advised and managed real estate investment company that owns a diverse portfolio of income-producing properties and land held for development throughout the Southern United States. Our portfolio of income-producing properties includes residential apartment communities ("multifamily properties"), office buildings and retail properties ("commercial properties"). Our investment strategy includes acquiring existing income-producing properties as well as developing new properties on land already owned or acquired for a specific development project.
Our operations are managed by Pillar Income Asset Management, Inc. (“Pillar”) in accordance with an Advisory Agreement. Pillar’s duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges our debt and equity financing with third party lenders and investors. We have no employees. Employees of Pillar render services to us in accordance with the terms of the Advisory Agreement. Pillar is considered to be a related party due to its common ownership with Realty Advisors, Inc. (“RAI”), who is our controlling shareholder.
The following is a summary of our recent acquisition, disposition, financing and development activities:
Dispositions
On March 30, 2021, we sold a 50% ownership interest in Overlook at Allensville Phase II, a 144 unit multifamily property in Sevierville, Tennessee to Macquarie for $2.6 million resulting in gain on sale of $1.4 million. Concurrent with the sale, we each contributed our 50% ownership interests in Overlook at Allensville Phase II into VAA.
On August 26, 2021, we sold 600 Las Colinas, a 512,173 square foot office building in Irving, Texas for $74.8 million, resulting in gain on sale of $27.3 million. We used the proceeds to pay off the mortgage note payable on the property (See "Financing Activities") and for general corporate purposes.
During the year ended December 31, 2021, we sold a total of 134.7 acres of land from our holdings in Windmill Farms for $20.2 million, in aggregate, resulting in gains on sale of $10.3 million. In addition, we sold 14.09 acres of land from our holdings in Mercer Crossing for $9.0 million, resulting in a gain on sale of $6.4 million.
On January 14, 2022, we sold Toulon, a 240 unit multifamily property in Gautier, Mississippi for $26.8 million, resulting in gain on sale of $9.4 million. We used the proceeds to pay off the $14.7 million mortgage note payable on the property and for general corporate purposes.
On May 17, 2022, we sold Fruitland Park, a 6,722 square foot commercial building in Fruitland Park, Florida for $0.8 million, resulting in gain on sale of $0.7 million. We used the proceeds for general corporate purposes.
During the six months ended June 30, 2022, we sold a total of 26.9 acres of land from our holdings in Windmill Farms for $5.1 million, in aggregate, resulting in gains on sale of $4.2 million.



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Financing Activities
On March 2, 2021, we extended our $1.2 million loan on Athens to August 28, 2022.
On March 4, 2021, we extended the maturity of our loan on Windmill Farms until February 28, 2023 at a reduced interest rate of 5%.
On August 25, 2021, we replaced the existing loan on Villas at Bon Secour with a new $20.0 million loan that bears interest at 3.08% and matures on September 1, 2031.
On August 26, 2021, we paid off the $35.9 million loan on 600 Las Colinas in connection with the sale of the underlying property (See "Dispositions").
On January 14, 2022, the loan on Toulon was paid off in connection with the sale of the underlying property (See "Dispositions").
On March 3, 2022, the loan on Stanford Center was extended to February 26, 2023.
Development Activities
During 2021, we spent $14.0 million on our ongoing development of Windmill Farms. Our expenditure includes $1.1 million on the development of land lots for sale to single family home developers and $13.0 million on reimbursable infrastructure investments. During the six months ended June 30, 2022, we spent $2.8 million on our ongoing development of Windmill Farms. Our expenditure includes $1.2 million on the development of land lots for sale to single family home developers and $1.7 million on reimbursable infrastructure investments.
We have investment in nine notes receivable that were issued to fund the development of multifamily properties . As of June 30, 2022, one of the projects was in construction, two were in lease-up and six were stabilized. In 2022, we advanced $1.0 million on these development notes. Each of these notes are convertible, at our option, into a 100% ownership interest in the underlying property.
Other Developments:
During 2022, we recorded a loss of $29.6 million on the remeasurements of certain assets ("Earn Out Obligation") that were sold in connection with our investment in VAA.
On November 17, 2021, we entered into an agreement with Macquarie to pursue a sale of the properties of VAA in accordance with the provisions of the joint venture agreement. The parties further agreed that the Company would be able to acquire seven of the properties (“Holdback Properties”) from the joint venture at an agreed upon market price.
On June 17, 2022, VAA entered into an agreement (“PSA”) to sell forty-five properties to two private equity funds (collectively, the “Buyer”) for a $1.8 billion. In connection with the sale, we plan to see Sugar Mill Phase III to the Buyer. The PSA provides for an inspection period in which the Buyer may decrease the number the properties acquired by up to five properties. In connection with the PSA, the Buyer deposited $50.0 million into escrow. The sale is expected to be completed in the third quarter of 2022. VAA intends to distribute the net proceeds and the Holdback Properties to the Members immediately following the completion of the sale.
Our ownership interest in VAA is held by SPC, and is therefore subject to the bond covenants of the three series of bonds that have been issued by SPC. These provisions include restrictions on the distribution of cash from SPC (See Note 12 - Bonds Payable in our consolidated financial statements).
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Critical Accounting Policies
The preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Some of these estimates and assumptions include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible accounts, impairment of long-lived assets, the allocation of purchase price between tangible and intangible assets, capitalization of costs and fair value measurements. Our significant accounting policies are described in more detail in Note 2—Summary of Significant Accounting Policies in our notes to the consolidated financial statements in the Annual Report. However, the following policies are deemed to be critical.
Fair Value of Financial Instruments
We apply the guidance in ASC Topic 820, “Fair Value Measurements and Disclosures”, to the valuation of real estate assets. These provisions define fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date, establish a hierarchy that prioritizes the information used in developing fair value estimates and require disclosure of fair value measurements by level within the fair value hierarchy. The hierarchy gives the highest priority to quoted prices in active markets (Level 1 measurements) and the lowest priority to unobservable data (Level 3 measurements), such as the reporting entity’s own data.
The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and includes three levels defined as follows:
Level 1 – Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets.
Level 2 – Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – Unobservable inputs that are significant to the fair value measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Related Parties
We apply ASC Topic 805, “Business Combinations”, to evaluate business relationships. Related parties are persons or entities who have one or more of the following characteristics, which include entities for which investments in their equity securities would be required, trust for the benefit of persons including principal owners of the entities and members of their immediate families, management personnel of the entity and members of their immediate families and other parties with which the entity may deal if one party controls or can significantly influence the decision making of the other to an extent that one of the transacting parties might be prevented from fully pursuing our own separate interests, or affiliates of the entity.
Results of Operations
Many of the variations in the results of operations, discussed below, occurred because of the transactions affecting our properties described above, including those related to the Lease-Up Properties and the Disposition Properties (each as defined below).
For purposes of the discussion below, we define "Same Properties" as those properties that are substantially leased-up and in operation for the entirety of both periods of the comparison. Non-Same Properties for comparison purposes include those properties that have been recently constructed or leased-up (“Lease-up Properties”) and properties that have been disposed of ("Disposition Properties"). A developed property is considered leased-up, when it achieves occupancy of 80% or more. We move a property in and out of Same Properties based on whether the property is substantially leased-up and in operation for the entirety of both periods of the comparison. Accordingly, the Same Properties consist of all properties, excluding the Lease-up Properties and the Disposition Properties for the periods of comparison.
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For the comparison of the three and six months ended June 30, 2022 to the three and six months ended June 30, 2021, the Lease-up Properties are Forest Grove, Parc at Denham Springs Phase II and Sugar Mill Phase III; and the Disposition Properties are Overlook at Allensville Phase II, 600 Las Colinas and Toulon.
The following table summarizes our results of operations for the three and six months ended June 30, 2022 and 2021:
Three Months Ended June 30,Six Months Ended June 30,
20222021Variance20222021Variance
Multifamily Segment
   Revenue$2,945 $3,529 $(584)$6,174 $7,365 $(1,191)
   Operating expenses(1,708)(2,111)403 (3,429)(4,234)805 
1,237 1,418 (181)2,745 3,131 (386)
Commercial Segment
   Revenue4,314 6,665 (2,351)8,566 13,190 (4,624)
   Operating expenses(2,104)(2,947)843 (4,411)(6,656)2,245 
2,210 3,718 (1,508)4,155 6,534 (2,379)
Segment profit3,447 5,136 (1,689)6,900 9,665 (2,765)
Other non-segment items of income (expense)
   Depreciation and amortization(2,298)(3,211)913 (4,647)(6,538)1,891 
   General, administrative and advisory(5,052)(11,605)6,553 (10,957)(17,276)6,319 
   Interest, net3,030 (2,065)5,095 3,645 (4,159)7,804 
   Loss on extinguishment of debt— — — (1,639)— (1,639)
Gain (loss) on foreign currency transactions14,132 (4,793)18,925 17,904 2,824 15,080 
Gain (loss) sale or write down of assets3,893 (24,445)28,338 15,041 (7,047)22,088 
   Income from joint ventures2,048 4,572 (2,524)7,242 7,908 (666)
   Other income830 2,750 (1,920)1,108 4,177 (3,069)
Net income (loss)$20,030 $(33,661)$53,691 $34,597 $(10,446)$45,043 
Comparison of the three months ended June 30, 2022 to the three months ended June 30, 2021:
Our $53.7 million increase in net income during the three months ended June 30, 2022 is primarily attributed to the following:
The decrease in profit from the multifamily and commercial segments is due to the Disposition Properties.
The decrease in general, administrative and advisory expenses is primarily due to the decrease legal costs from the arbitration and Clapper settlements (See "Other Developments" in Management's Overview) in 2021.
The change in interest expense, net is primarily due a reduction in reserve for uncollectable notes receivable and a decrease in interest from mortgage notes payables on the Disposition Properties.
The increase in gains on foreign currency transactions is due to favorable changes in the U.S. Dollar and the New Israeli Shekel conversion rate.
The change in gain (loss) on sale or write down of assets is primarily due to the arbitration settlement of Earn Out Obligation in 2021 (See "Other Developments" in Management's Overview).
The decrease in income from joint ventures is primarily due an increase in a liquidation liability owed by VAA upon completion of the planned sale of its property portfolio (See "Other Developments" in Management's Overview).

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Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021:
Our $45.0 million increase in net income during the six months ended June 30, 2022 is primarily attributed to the following:
The decrease in profit from the multifamily and commercial segments is due to the Disposition Properties.
The decrease in general, administrative and advisory expenses is primarily due to the decrease legal costs from the Clapper and the arbitration settlements in 2021 (See "Other Developments" in Management's Overview).
The change in interest expense, net is primarily due a reduction in reserve for uncollectable notes receivable and a decrease in interest from mortgage notes payables on the Disposition Properties and interest on the bonds payable.
The loss on extinguishment of debt is due to the early pay off of the mortgage note payable on Toulon in connection with sale of the underlying property (See "Dispositions" and "Financing Activities" in Management's Overview).
The increase in gain on foreign currency transactions is due to favorable changes in the U.S. Dollar and the New Israeli Shekel conversion rate.
The change in gain on sale or write down of assets is due to the settlement of Earn Out Obligation in 2021 (See "Other Developments" in Management's Overview) offset in part by the gain on sale of Toulon in 2022.
The decrease in other income relates to the recovery of bad debts in 2021.
Liquidity and Capital Resources
Our principal sources of cash have been, and will continue to be, property operations; proceeds from land and income-producing property sales; collection of notes receivable; refinancing of existing mortgage notes payable; and additional borrowings, including mortgage notes and bonds payable, and lines of credit.
Our principal liquidity needs are to fund normal recurring expenses; meet debt service and principal repayment obligations including balloon payments on maturing debt; fund capital expenditures, including tenant improvements and leasing costs; fund development costs not covered under construction loans; and fund possible property acquisitions.
We anticipate that our cash and cash equivalents as of June 30, 2022, along with cash that will be generated in the remainder of 2022 from notes and interest receivables, will be sufficient to meet all of our cash requirements. We may selectively sell land and income-producing assets, refinance or extend real estate debt and seek additional borrowings secured by real estate to meet our liquidity requirements. Although history cannot predict the future, historically, we have been successful at refinancing and extending a portion of our current maturity obligations.
The following summary discussion of our cash flows is based on the consolidated statements of cash flows in our consolidated financial statements, and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below (dollars in thousands):
Six Months Ended June 30, 
20222021Incr /(Decr)
Net cash used in operating activities$(8,993)$(88)$(8,905)
Net cash provided by investing activities$33,794 $29,529 $4,265 
Net cash used in financing activities$(39,839)$(48,453)$8,614 
The change in cash from operating activities is primarily due to the decrease in distributions of income from unconsolidated joint venture and a decrease in account payable in 2022.
The decrease in cash provided by investing activities is primarily due the net redemption of short term investments in 2022 and an increase in proceeds from the sale of assets, offset in part by decrease in collection of notes receivable and a decrease in distribution from joint venture in 2022..
The decrease in cash used in financing activities is primarily due to the $9.2 million decrease in bond payments in 2022.
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Funds From Operations ("FFO")
We use FFO in addition to net income to report our operating and financial results and considers FFO and FFO-diluted as supplemental measures for the real estate industry and a supplement to GAAP measures. The National Association of Real Estate Investment Trusts ("Nareit") defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of properties, plus real estate related depreciation and amortization, impairment write-downs of real estate and write-downs of investments in an affiliate where the write-downs have been driven by a decrease in the value of real estate held by the affiliate and after adjustments for unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis. We also present FFO excluding the impact of the effects of foreign currency transactions.
FFO and FFO on a diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization, as we believe real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. We believe that such a presentation also provides investors with a meaningful measure of our operating results in comparison to the operating results of other real estate companies. In addition, we believe that FFO excluding gain (loss) from foreign currency transactions provide useful supplemental information regarding our performance as they show a more meaningful and consistent comparison of our operating performance and allows investors to more easily compare our results.
We believe that FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP, and is not indicative of cash available to fund all cash flow needs. We also caution that FFO, as presented, may not be comparable to similarly titled measures reported by other real estate companies.
We compensate for the limitations of FFO by providing investors with financial statements prepared according to GAAP, along with this detailed discussion of FFO and a reconciliation of net income to FFO and FFO-diluted. We believe that to further understand our performance, FFO should be compared with our reported net income and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements.

The following table reconciles net (loss) income attributable to the Company to FFO and FFO adjusted for the three and six months ended June 30, 2022 and 2021 (dollars and shares in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net income (loss) attributable to the Company$16,312 $(27,328)$27,626 $(9,260)
Depreciation and amortization2,298 3,211 4,647 6,538 
(Gain) loss on sale or write down of assets(3,893)24,445 (15,041)7,047 
Gain on sale of land2,763 5,155 4,752 11,112 
Depreciation and amortization on unconsolidated joint ventures at pro rata share2,024 2,990 3,593 3,610 
FFO19,504 8,473 25,577 19,047 
Loss on extinguishment of debt— — 1,639 — 
(Gain) loss on foreign currency transactions(14,132)4,793 (17,904)(2,824)
FFO-adjusted$5,372 $13,266 $9,312 $16,223 
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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Optional and not included.
ITEM 4.    CONTROLS AND PROCEDURES
Based on an evaluation by our management (with the participation of our Principal Executive Officer and Principal Financial Officer), as of the end of the period covered by this report, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.
There has been no change in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II.    OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
In February 2019, Paul Berger ("Berger") filed suit against us and others that alleged that our subsidiary IOR completed improper sales and/or transfers of property. Berger sought to proceed derivatively and directly, requests a payoff of various related party loans to IOR and that IOR then distribute the funds to its stockholders. After discovery and motions to dismiss substantial portions of the complaint, on June 28, 2022, Plaintiff Berger sought to voluntarily dismiss the action for reasons stated in the motion. The parties have not entered into any settlement, and neither Berger nor their counsel has received any consideration for the voluntary dismissal. The parties, through counsel, have stipulated to the dismissal with prejudice. On June 29, 2022, the United States District Court ordered that notice of the dismissal be provided to IOR shareholders. A copy of the required notice was filed as an exhibit to a Form 8-K of IOR for event occurring June 29, 2022 (the date of the Court’s order), and on July 7, 2022, a copy of the required notice was posted on IOR’s website. If no action is taken by one or more other stockholders of IOR prior to August 19, 2022, the Court may enter an order dismissing the Berger case with prejudice.
ITEM 1A    RISK FACTORS
Except as set forth below, there have been no material changes from the risk factors previously disclosed in the 2021 10-K. For a discussion on these risk factors, please see “Item 1A. Risk Factors” contained in the 2021 10-K.
Risks Related to COVID-19 Pandemic
We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and our property portfolio. While we did not incur significant disruptions during the six months ended June 30, 2022 from the COVID-19 pandemic, our commercial properties have experienced a decline in occupancy. We are unable to predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. Nearly every industry has been impacted directly or indirectly, and the commercial real estate market has come under pressure due to numerous factors, including preventative measures taken by local, state and federal authorities to alleviate the public health crisis such as mandatory business closures, quarantines, and restrictions on travel and “shelter-in-place” or “stay-at-home” orders. The future impact of COVID-19 on our business and financial activities will depend on future developments, which at this stage are unpredictable considering the fluctuations of COVID-19 outbreaks and the resulting changes in the markets.
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We have a program that allows for the repurchase of up to 1,250,000 shares. There were no shares purchased under this program during the six months ended June 30, 2022. As of June 30, 2022, 986,750 shares have been purchased and 263,250 shares may be purchased under the program.
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ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4.    MINE SAFETY DISCLOSURES
None
ITEM 5.    OTHER INFORMATION
None
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ITEM 6.    EXHIBITS
The following exhibits are filed herewith or incorporated by reference as indicated below:
Exhibit
Number
Description of Exhibit
3.0Certificate of Restatement of Articles of Incorporation of American Realty Investors, Inc. dated August 3, 2000 (incorporated by reference to Exhibit 3.0 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
3.1Certificate of Correction of Restated Articles of Incorporation of American Realty Investors, Inc. dated August 29, 2000 (incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q dated September 30, 2000).
3.2Articles of Amendment to the Restated Articles of Incorporation of American Realty Investors, Inc. decreasing the number of authorized shares of and eliminating Series B Cumulative Convertible Preferred Stock dated August 23, 2003 (incorporated by reference to Exhibit 3.3 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).
3.3Articles of Amendment to the Restated Articles of Incorporation of American Realty Investors, Inc., decreasing the number of authorized shares of and eliminating Series I Cumulative Preferred Stock dated October 1, 2003 (incorporated by reference to Exhibit 3.4 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).
3.4Bylaws of American Realty Investors, Inc. (incorporated by reference to Exhibit 3.2 to Registrant’s Registration Statement on Form S-4 filed December 30, 1999).
4.1Certificate of Designations, Preferences and Relative Participating or Optional or Other Special Rights, and Qualifications, Limitations or Restrictions Thereof of Series F Redeemable Preferred Stock of American Realty Investors, Inc., dated June 11, 2001 (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).
4.2Certificate of Withdrawal of Preferred Stock, Decreasing the Number of Authorized Shares of and Eliminating Series F Redeemable Preferred Stock, dated June 18, 2002 (incorporated by reference to Exhibit 3.0 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
4.3Certificate of Designation, Preferences and Rights of the Series I Cumulative Preferred Stock of American Realty Investors, Inc., dated February 3, 2003 (incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002).
4.4Certificate of Designation for Nevada Profit Corporations designating the Series J 8% Cumulative Convertible Preferred Stock as filed with the Secretary of State of Nevada on March 16, 2006 (incorporated by reference to Registrant’s current report on Form 8-K for event of March 16, 2006).
4.5Certificate of Designation for Nevada Profit Corporation designating the Series K Convertible Preferred Stock as filed with the Secretary of State of Nevada on May 6, 2013 (incorporated by reference to Registrant’s current report on form 8-K for event of May 7, 2013).
10.1Advisory Agreement between American Realty Investors, Inc. and Pillar Income Asset Management, Inc., dated April 30, 2011 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, dated May 2, 2011).
10.2Second Amendment to Modification of Stipulation of Settlement dated October 17, 2001 (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-4, dated February 24, 2002).
Certification by the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
Certification by the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
Certification pursuant to 18 U.S.C. 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith.

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SIGNATURE PAGE
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: August 12, 2022By:/s/ ERIK L. JOHNSON
Erik L. Johnson
Executive Vice President and Chief Financial Officer

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Document

Exhibit 31.1
CERTIFICATION
I, Bradley J. Muth, certify that:
1.I have reviewed this quarterly report on Form 10-Q of American Realty Investors, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
4.The registrant’s other certifying officers(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and
(d)Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officers(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 12, 2022By:/s/ BRADLEY J. MUTH
Bradley J. Muth
President and Chief Executive Officer



Document

Exhibit 31.2
CERTIFICATION
I, Erik L. Johnson, certify that:
1.I have reviewed this quarterly report on Form 10-Q of American Realty Investors, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
4.The registrant’s other certifying officers(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and
(d)Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officers(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: August 12, 2022By:/s/ ERIK L. JOHNSON
Erik L. Johnson
Executive Vice President and Chief Financial Officer



Document

Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned officer of American Realty Investors, Inc., a Nevada corporation (the “Company”) hereby certifies that:
(i)The Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2022 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
(ii)The information contained in the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2022 fairly presents in all material respects, the financial condition and results of operations of the Company, at and for the period indicated.

Dated: August 12, 2022By:/s/ BRADLEY J. MUTH
Bradley J. Muth
President and Chief Executive Officer
/s/ ERIK L. JOHNSON
Erik L. Johnson
Executive Vice President and Chief Financial Officer



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Attachment: XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT


arl-20220630_cal.xml
Attachment: XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT


arl-20220630_def.xml
Attachment: XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT


arl-20220630_lab.xml
Attachment: XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT


arl-20220630_pre.xml
Attachment: XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT