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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 March 31, 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)

Nevada | 94-6565852
(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 class | Trading Symbol(s) | Name of each exchange on which registered
Common Stock | ARL | NYSE

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 May 13, 2022, there were 16,152,043 shares of common stock outstanding.

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

PART I. FINANCIAL INFORMATION | PAGE
Item 1. | Financial Statements |
| Consolidated Balance Sheets at March 31, 2022 and December 31, 2021 | 3
| Consolidated Statements of Operations for the three months ended March 3 1, 202 2 and 202 1 | 4
| Consolidated Statements of Equity for the three months ended March 31, 2022 and 202 1 | 5
| Consolidated Statements of Cash Flows for the three months ended March 3 1, 202 2 and 202 1 | 6
| Notes to Consolidated Financial Statements | 7
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19
Item 3. | Quantitative and Qualitative Disclosures About Market Risks | 25
Item 4. | Controls and Procedures | 25
PART II. OTHER INFORMATION |
Item 1. | Legal Proceedings | 25
Item 1A. | Risk Factors | 25
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 26
Item 3. | Defaults Upon Senior Securities | 26
Item 4. | Mine Safety Disclosures | 26
Item 5. | Other Information | 26
Item 6. | Exhibits | 27
Signatures | 29

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AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and par value amounts)
(Unaudited)

| March 31, 2022 |  | December 31, 2021
Assets |  |  |
Real estate | $ | 284,480 |  |  | $ | 296,363 |
Cash and cash equivalents | 13,794 |  |  | 50,748 |
Restricted cash | 21,631 |  |  | 21,986 |
Short-term investments | 32,585 |  |  | 16,001 |
Notes receivable (including $73,516 and $75,872 at March 31, 2022 and December 31, 2021, respectively, from related parties) | 136,512 |  |  | 136,607 |
Investment in unconsolidated joint ventures | 59,803 |  |  | 61,621 |
Receivable from related parties | 101,010 |  |  | 100,599 |
Other assets (including $2,733 and $4,535 at March 31, 2022 and December 31, 2021, respectively, from related parties) | 79,623 |  |  | 86,644 |
Total assets | $ | 729,438 |  |  | $ | 770,569 |
Liabilities and Equity |  |  |
Liabilities: |  |  |
Mortgages and other notes payable | $ | 169,205 |  |  | $ | 183,392 |
Bonds payable | 163,571 |  |  | 189,452 |
Accounts payable and other liabilities (including $611 and $616 at March 31, 2022 and December 31, 2021, respectively, to related parties) | 32,181 |  |  | 44,518 |
Accrued interest | 3,272 |  |  | 6,565 |
Deferred revenue | 9,791 |  |  | 9,791 |
Total liabilities | 378,020 |  |  | 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 capital | 62,090 |  |  | 62,090 |
Retained earnings | 187,399 |  |  | 176,085 |
Total shareholders' equity | 251,452 |  |  | 240,138 |
Noncontrolling interests | 99,966 |  |  | 96,713 |
Total equity | 351,418 |  |  | 336,851 |
Total liabilities and equity | $ | 729,438 |  |  | $ | 770,569 |

The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)

|  |  | Three Months Ended March 31,
|  |  |  |  | 2022 |  | 2021
Revenues: |  |  |  |  |  |  |
Rental revenues (including $256 and $242 for three months ended March 31, 2022 and 2021, respectively, from related parties) |  |  |  |  | $ | 7,481 |  |  | $ | 10,361 |
Other income |  |  |  |  | 306 |  |  | 1,467 |
Total revenue |  |  |  |  | 7,787 |  |  | 11,828 |
Expenses: |  |  |  |  |  |  |
Property operating expenses (including $117 and $382 for three months ended March 31, 2022 and 2021, respectively, from related parties) |  |  |  |  | 4,028 |  |  | 5,832 |
Depreciation and amortization |  |  |  |  | 2,349 |  |  | 3,327 |
General and administrative (including $1,390 and $1,670 for three months ended March 31, 2022 and 2021, respectively, from related parties) |  |  |  |  | 2,720 |  |  | 3,235 |
Advisory fee to related party |  |  |  |  | 3,185 |  |  | 2,436 |
Total operating expenses |  |  |  |  | 12,282 |  |  | 14,830 |
Net operating loss |  |  |  |  | (4,495) |  |  | (3,002) |
Interest income (including $4,930 and $4,769 for the three months ended March 31, 2022 and 2021, respectively, from related parties) |  |  |  |  | 6,782 |  |  | 5,644 |
Interest expense (including $1,505 and $1,395 for the three months ended March 31, 2022 and 2021, respectively, from related parties) |  |  |  |  | (6,167) |  |  | (7,738) |
Gain on foreign currency transactions |  |  |  |  | 3,772 |  |  | 7,617 |
Loss on extinguishment of debt |  |  |  |  | (1,639) |  |  | — |
Equity in income from unconsolidated joint ventures |  |  |  |  | 5,194 |  |  | 3,336 |
Gain on sale or write-down of assets, net |  |  |  |  | 11,148 |  |  | 17,398 |
Income tax provision |  |  |  |  | (28) |  |  | (40) |
Net income |  |  |  |  | 14,567 |  |  | 23,215 |
Net income attributable to noncontrolling interests |  |  |  |  | (3,253) |  |  | (5,147) |
Net income attributable to the Company |  |  |  |  | $ | 11,314 |  |  | $ | 18,068 |
Earnings per share - basic |  |  |  |  |  |  |
Basic and diluted |  |  |  |  | $ | 0.70 |  |  | $ | 1.12 |
Weighted average common shares used in computing earnings per share |  |  |  |  |  |  |
Basic and diluted |  |  |  |  | 16,152,043 |  |  | 16,152,043 |

The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(dollars in thousands)
(Unaudited)

|  | Preferred Stock |  | Common Stock |  | Treasury Stock |  | Paid-in Capital |  | Retained Earnings |  | Total Shareholders' Equity |  | Noncontrolling Interest |  | Total Equity
Three Months Ended March 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance, January 1, 2022 |  | $ | 1,801 |  |  | $ | 162 |  |  | — |  |  | 62,090 |  |  | 176,085 |  |  | $ | 240,138 |  |  | $ | 96,713 |  |  | $ | 336,851 |
Net income |  | — |  |  | — |  |  | — |  |  | — |  |  | 11,314 |  |  | 11,314 |  |  | 3,253 |  |  | 14,567 |
Balance, March 31, 2022 |  | $ | 1,801 |  |  | $ | 162 |  |  | $ | — |  |  | $ | 62,090 |  |  | $ | 187,399 |  |  | $ | 251,452 |  |  | $ | 99,966 |  |  | $ | 351,418 |
Three Months Ended March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance, January 1, 2021 |  | $ | 1,801 |  |  | $ | 162 |  |  | $ | (2) |  |  | $ | 62,092 |  |  | $ | 172,738 |  |  | $ | 236,791 |  |  | $ | 93,615 |  |  | $ | 330,406 |
Net income |  | — |  |  | — |  |  | — |  |  | — |  |  | 18,068 |  |  | 18,068 |  |  | 5,147 |  |  | 23,215 |
Cancellation of treasury shares |  | — |  |  | — |  |  | 2 |  |  | (2) |  |  | — |  |  | — |  |  | — |  |  | — |
Balance, March 31, 2021 |  | $ | 1,801 |  |  | $ | 162 |  |  | $ | — |  |  | $ | 62,090 |  |  | $ | 190,806 |  |  | $ | 254,859 |  |  | $ | 98,762 |  |  | $ | 353,621 |

The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)

| Three Months Ended March 31,
| 2022 |  | 2021
Cash Flow From Operating Activities: |  |  |
Net income | $ | 14,567 |  |  | $ | 23,215 |
Adjustments to reconcile net income to net cash used in operating activities: |  |  |
Gain on sale or write down of assets | (11,148) |  |  | (17,398) |
Gain on foreign currency transactions | (3,772) |  |  | (7,617) |
Loss on extinguishment of debt | 1,639 |  |  | — |
Depreciation and amortization | 3,210 |  |  | 3,953 |
Provision (recovery) of bad debts | 139 |  |  | (1,017) |
Equity in income from unconsolidated joint ventures | (5,194) |  |  | (3,336) |
Distribution of income from unconsolidated joint ventures | — |  |  | 3,157 |
Changes in assets and liabilities, net of dispositions: |  |  |
Other assets | 5,429 |  |  | 2,981 |
Related party receivables | (411) |  |  | 2,525 |
Accrued interest payable | (3,311) |  |  | (4,244) |
Accounts payable and other liabilities | (5,334) |  |  | (3,668) |
Net cash used in operating activities | (4,186) |  |  | (1,449) |
Cash Flow From Investing Activities: |  |  |
Collection of notes receivable | 632 |  |  | 9,373 |
Originations and advances on notes receivable | (537) |  |  | (10,448) |
Purchase of short-term investment | (16,584) |  |  | — |
Development and renovation of real estate | (6,388) |  |  | (4,978) |
Deferred leasing costs | — |  |  | (755) |
Proceeds from sale of assets | 28,523 |  |  | 14,434 |
Contribution to unconsolidated joint venture | — |  |  | (411) |
Distribution from unconsolidated joint venture | — |  |  | 7,430 |
Net cash provided by investing activities | 5,646 |  |  | 14,645 |
Cash Flow From Financing Activities: |  |  |
Payments on mortgages, other notes and bonds payable | (38,179) |  |  | (25,133) |
Debt extinguishment costs | (590) |  |  | — |
Deferred financing costs | — |  |  | (22) |
Net cash used in financing activities | (38,769) |  |  | (25,155) |
Net decrease in cash, cash equivalents and restricted cash | (37,309) |  |  | (11,959) |
Cash, cash equivalents and restricted cash, beginning of period | 72,734 |  |  | 87,020 |
Cash, cash equivalents and restricted cash, end of period | $ | 35,425 |  |  | $ | 75,061 |

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 March 31, 2022, our portfolio of properties consisted of:
● Five commercial properties, consisting of four office buildings and one retail property, comprising in aggregate of approximately 1,063,515 square feet;
● Eight multifamily properties, owned directly by us, comprising of 1,252 units;
● Appr oximately 1,877 ac res 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. Four 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 standard was effective upon issuance and can be applied through December 31, 2022. We have mortgage notes payable with interest rates that reference LIBOR, and therefore, we will adopt this standard when LIBOR is discontinued.
3. Earnings Per Share
Earnings Per Share (“EPS”) is computed by dividing net income available to common shares, adjusted for preferred dividends, 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 March 31,
|  |  |  |  | 2022 |  | 2021
Net income |  |  |  |  | $ | 14,567 |  |  | $ | 23,215 |
Net income attributable to noncontrolling interests |  |  |  |  | (3,253) |  |  | (5,147) |
Net income attributable to common shares |  |  |  |  | $ | 11,314 |  |  | $ | 18,068 |
Weighted-average common shares outstanding — basic and diluted |  |  |  |  | 16,152,043 |  |  | 16,152,043 |
EPS - attributable to common shares — basic and diluted |  |  |  |  | $ | 0.70 |  |  | $ | 1.12 |

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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:

| Three Months Ended March 31,
| 2022 |  | 2021
Cash paid for interest | $ | 10,495 |  |  | $ | 9,713 |
Cash - beginning of period |  |  |
Cash and cash equivalents | $ | 50,748 |  |  | $ | 36,814 |
Restricted cash | 21,986 |  |  | 50,206 |
| $ | 72,734 |  |  | $ | 87,020 |
Cash - end of period |  |  |
Cash and cash equivalents | $ | 13,794 |  |  | $ | 53,865 |
Restricted cash | 21,631 |  |  | 21,196 |
| $ | 35,425 |  |  | $ | 75,061 |
Payments on mortgages, notes and bonds payable |  |  |
Payments on mortgages and notes payable | $ | 15,257 |  |  | $ | 2,421 |
Payments on bonds payable | 22,922 |  |  | 22,712 |
| $ | 38,179 |  |  | $ | 25,133 |

The following is a schedule of noncash investing and financing activities:

| Three Months Ended March 31,
| 2022 |  | 2021
Assets contributed to joint venture | $ | — |  |  | $ | 18,608 |
Liabilities assumed by joint venture | $ | — |  |  | $ | 17,592 |
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 months ended March 31, 2022 and 2021:

|  |  | Three Months Ended March 31,
|  |  |  |  | 2022 |  | 2021
Multifamily Segment |  |  |  |  |  |  |
Revenues |  |  |  |  | $ | 3,229 |  |  | $ | 3,836 |
Operating expenses |  |  |  |  | (1,721) |  |  | (2,123) |
Profit from segment |  |  |  |  | 1,508 |  |  | 1,713 |
Commercial Segment |  |  |  |  |  |  |
Revenues |  |  |  |  | 4,252 |  |  | 6,525 |
Operating expenses |  |  |  |  | (2,307) |  |  | (3,709) |
Profit from segment |  |  |  |  | 1,945 |  |  | 2,816 |
Total profit from segments |  |  |  |  | $ | 3,453 |  |  | $ | 4,529 |

The table below reflects the reconciliation of total profit from segments to net income for the three months ended March 31, 2022 and 2021:

|  |  | Three Months Ended March 31,
|  |  |  |  | 2022 |  | 2021
Total profit from segments |  |  |  |  | $ | 3,453 |  |  | $ | 4,529 |
Other non-segment items of income (expense) |  |  |  |  |  |  |
Depreciation |  |  |  |  | (2,349) |  |  | (3,327) |
General and administrative |  |  |  |  | (2,720) |  |  | (3,235) |
Advisory fee to related party |  |  |  |  | (3,185) |  |  | (2,436) |
Other income |  |  |  |  | 306 |  |  | 1,467 |
Interest income |  |  |  |  | 6,782 |  |  | 5,644 |
Interest expense |  |  |  |  | (6,167) |  |  | (7,738) |
Gain on foreign currency transaction |  |  |  |  | 3,772 |  |  | 7,617 |
Loss on extinguishment of debt |  |  |  |  | (1,639) |  |  | — |
Income from unconsolidated joint ventures |  |  |  |  | 5,194 |  |  | 3,336 |
Gain on sales or write-down of assets |  |  |  |  | 11,148 |  |  | 17,398 |
Income tax provision |  |  |  |  | (28) |  |  | (40) |
Net income |  |  |  |  | $ | 14,567 |  |  | $ | 23,215 |

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 months ended March 31, 2022 and 2021:

|  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2022 |  | 2021
Fixed component |  |  |  |  |  | $ | 6,996 |  |  | $ | 9,863 |
Variable component |  |  |  |  |  | 485 |  |  | 498 |
|  |  |  |  |  | $ | 7,481 |  |  | $ | 10,361 |

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 |  | $ | 12,195 |
2023 |  | 8,093 |
2024 |  | 5,391 |
2025 |  | 5,079 |
2026 |  | 4,911 |
Thereafter |  | 18,777 |
|  | $ | 54,446 |

7. Real Estate Activity
Below is a summary of our real estate as of March 31, 2022 and December 31, 2021:

| March 31, 2022 |  | December 31, 2021
Land | $ | 65,622 |  |  | $ | 67,514 |
Building and improvements | 200,942 |  |  | 219,327 |
Tenant improvements | 25,099 |  |  | 21,364 |
Construction in progress | 52,591 |  |  | 51,091 |
Total cost | 344,254 |  |  | 359,296 |
Less accumulated deprecation | (59,774) |  |  | (62,933) |
Total real estate | $ | 284,480 |  |  | $ | 296,363 |

Our construction in progress represents our investment in Windmill Farms.
Our gain on sale or write-down of assets, net for the three months ended March 31, 2022 and 2021 consist of the following:

|  |  | Three Months Ended March 31,
|  |  |  |  | 2022 |  | 2021
Land(1) |  |  |  |  | $ | 1,989 |  |  | $ | 5,957 |
Multifamily Properties(2) |  |  |  |  | 9,364 |  |  | 11,441 |
Commercial Properties |  |  |  |  | (205) |  |  | — |
|  |  |  |  | $ | 11,148 |  |  | $ | 17,398 |

(1)Includes the gain on sale of lots related to our investment in Windmill Farms, Mercer Crossing and other land holdings.
(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
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
2021 amount is attributed to the gain from the sale of a 50% ownership interest in Overlook at Allensville Phase II (See Note 10 – Investment in Unconsolidated Joint Ventures) and the gain on the sale of various multifamily properties that had previously been deferred (See Note 15 – Deferred Income).
8. Short-term Investments
We have an investment in variable denominated floating rate notes with Toyota Motor Credit Corporation. The notes are have no stated maturity and are subject to immediate repayment at the Company’s option. The interest rate on the note was 1.11% and 1.15% at March 31, 2022 and December 31, 2021, respectively.
9. Notes Receivable
The following table summarizes our notes receivable as of March 31, 2022 and December 31, 2021:

|  | Carrying value |  |
Property/Borrower |  | March 31, 2022 |  | December 31, 2021 |  | Interest Rate |  | Maturity Date
ABC Land and Development, Inc. |  | $ | 4,408 |  |  | $ | 4,408 |  |  | 9.50 | % |  | 6/30/26
ABC Paradise, LLC |  | 1,210 |  |  | 1,210 |  |  | 9.50 | % |  | 6/30/26
Autumn Breeze(1) |  | 2,613 |  |  | 2,486 |  |  | 5.00 | % |  | 7/1/22
Bellwether Ridge(1) |  | 3,967 |  |  | 3,967 |  |  | 5.00 | % |  | 11/1/26
Forest Pines(1) |  | 6,472 |  |  | 6,472 |  |  | 5.00 | % |  | 11/1/22
Lake Wales |  | 3,000 |  |  | 3,000 |  |  | 9.50 | % |  | 6/30/26
Legacy Pleasant Grove |  | 496 |  |  | 496 |  |  | 12.00 | % |  | 10/23/22
McKinney Ranch |  | 4,554 |  |  | 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) |  | 3,603 |  |  | 3,700 |  |  | 5.00 | % |  | 11/1/26
Parc at Opelika(1) |  | 2,582 |  |  | 2,305 |  |  | 10.00 | % |  | 1/13/23
Parc at Windmill Farms(1) |  | 7,830 |  |  | 7,830 |  |  | 5.00 | % |  | 11/1/22
Phillips Foundation for Better Living, Inc.(2) |  | 184 |  |  | 813 |  |  | 12.00 | % |  | 3/31/24
Plum Tree(1) |  | 1,764 |  |  | 1,537 |  |  | 5.00 | % |  | 4/26/26
Riverview on the Park Land, LLC |  | 1,045 |  |  | 1,045 |  |  | 9.50 | % |  | 6/30/26
Spartan Land |  | 5,907 |  |  | 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) |  | 24,053 |  |  | 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) |  | 183 |  |  | 183 |  |  | 12.00 | % |  | 6/30/24
|  | $ | 136,512 |  |  | $ | 136,607 |  |  |  |  |

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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
(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.
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 a nd a note payable (“Mezzanine Loan”). Concurrent with the Contributi on, 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 out of the initial properties were subject to an earn-out provision ("Earn Out") that provides for a remeasurement of value after a two-year period following the completion of construction. Upon the formation of VAA, we recorded a 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 months ended March 31, 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. As of March 31, 2022, we owe $27,147 under the Earn Out Obligation.
On November 17, 2021, we entered into a Major Decision with Macquarie to engage a broker and initiate a sale of all the properties held by the VAA. In connection with the sale, VAA will distribute seven of its existing properties to us (referred to herein as the "Holdback Properties") and we in turn, will contribute one of our properties ("Contributed Property") into the portfolio offered for sale to third-parties. The remaining forty-five properties are referred to herein as the VAA Portfolio. The sales price for the Holdback Properties and Contributed Property will be the estimated value of these properties as stated in the agreement, multiplied by the ratio of the actual sales price of the VAA Portfolio over the estimated value of the portfolio as stated in the agreement.
Each of the properties in the VAA Portfolio is appraised on an annual basis as part of our filing requirement with the TASE. As of March 31, 2022, the fair value of the VAA Portfolio, based on these appraisals was $1.4 billion. The appraised value reflects an aggregate of individual property appraised value and does not reflect a premium that is sometimes offered in a portfolio sale. These values reflect a compression of cap rates for multifamily properties during the last year. However, there can be no assurances that these values will be realized. The Major Decision agreement will terminate on August 1, 2022, if the VAA Portfolio has not been sold.
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:

|  | March 31, 2022 |  | December 31, 2021
Assets (1) |  |  |  |
Real estate |  | $ | 1,213,324 |  |  | $ | 1,220,391 |
Other assets |  | 108,877 |  |  | 127,464 |
Total assets |  | $ | 1,322,201 |  |  | $ | 1,347,855 |
Liabilities and Partners' Capital (1) |  |  |  |
Mortgage notes payable |  | $ | 860,489 |  |  | $ | 867,430 |
Mezzanine notes payable |  | 238,952 |  |  | 242,942 |
Other liabilities |  | 34,837 |  |  | 49,877 |
Our share of partners' capital |  | 80,165 |  |  | 80,602 |
Outside partner's capital |  | 107,758 |  |  | 107,004 |
Total liabilities and partners' capital |  | $ | 1,322,201 |  |  | $ | 1,347,855 |
Investment in unconsolidated joint ventures |  |  |  |
Our share of partners' capital |  | $ | 80,165 |  |  | $ | 80,602 |
Our share of Mezzanine note payable |  | 120,842 |  |  | 125,306 |
Basis adjustment (2) |  | (141,204) |  |  | (144,287) |
Total investment in unconsolidated joint ventures |  | $ | 59,803 |  |  | $ | 61,621 |

(1) These amounts include the assets of VAA of $1,255,390 and $1,280,867 at March 31, 2022 and December 31, 2021, respectively, and liabilities of VAA of $1,113,466 and $1,137,273 at March 31, 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 (loss) from our investments in unconsolidated joint ventures:

|  |  | Three Months Ended March 31,
|  |  |  |  | 2022 |  | 2021
Revenue (1) |  |  |  |  |  |  |
Rental revenue |  |  |  |  | $ | 34,848 |  |  | $ | 31,070 |
Other revenue |  |  |  |  | 11,477 |  |  | 15,289 |
Total revenue |  |  |  |  | 46,325 |  |  | 46,359 |
Expenses (2) |  |  |  |  |  |  |
Operating expenses |  |  |  |  | 25,874 |  |  | 28,039 |
Depreciation and amortization |  |  |  |  | 8,151 |  |  | 8,062 |
Other income |  |  |  |  | — |  |  | (2,356) |
Interest |  |  |  |  | 13,566 |  |  | 14,175 |
Total expenses |  |  |  |  | 47,591 |  |  | 47,920 |
Net loss |  |  |  |  | $ | (1,266) |  |  | $ | (1,561) |
Our equity in the income (loss) in unconsolidated joint ventures |  |  |  |  | $ | 5,194 |  |  | $ | 3,336 |

(1) These amounts include revenue of VAA of $36,666 and $32,685 during the three months ended March 31, 2022 and 2021, respectively.
(2) These amounts include expenses of VAA of $38,336 and $35,101 during the three months ended March 31, 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 March 31, 2022 and December 31, 2021:

|  | Carrying value |  |  |  |
Property / Entity |  | March 31, 2022 |  | December 31, 2021 |  | Effective Interest Rate |  | Maturity Date
770 South Post Oak |  | 11,596 |  |  | 11,635 |  |  | 4.40 | % |  | 6/1/2025
Athens |  | 1,155 |  |  | 1,155 |  |  | 4.00 | % |  | 8/28/2022
Chelsea |  | 7,996 |  |  | 8,037 |  |  | 3.40 | % |  | 12/1/2050
EQK Portage - Land |  | 3,350 |  |  | 3,350 |  |  | 10.00 | % |  | 11/13/2024
Forest Grove |  | 7,220 |  |  | 7,263 |  |  | 3.75 | % |  | 5/5/2024
Landing Bayou |  | 14,345 |  |  | 14,407 |  |  | 3.50 | % |  | 9/1/2053
Legacy at Pleasant Grove |  | 13,275 |  |  | 13,352 |  |  | 3.60 | % |  | 4/1/2048
New Concept Energy |  | 3,542 |  |  | 3,542 |  |  | 6.00 | % |  | 9/30/2022
Parc at Denham Springs Phase II |  | 15,919 |  |  | 15,962 |  |  | 4.10 | % |  | 2/1/2060
RCM HC Enterprises |  | 5,086 |  |  | 5,086 |  |  | 9.50 | % |  | 12/17/2026
Stanford Center(1) |  | 38,844 |  |  | 38,979 |  |  | 6.00 | % |  | 2/26/2023
Sugar Mill Phase III |  | 9,196 |  |  | 9,216 |  |  | 4.50 | % |  | 2/1/2060
Toulon(2) |  | — |  |  | 13,697 |  |  | 3.20 | % |  | 12/1/2051
Villas at Bon Secour |  | 19,496 |  |  | 19,492 |  |  | 3.08 | % |  | 9/1/2031
Vista Ridge |  | 9,792 |  |  | 9,830 |  |  | 4.00 | % |  | 8/1/2053
Windmill Farms |  | 8,393 |  |  | 8,389 |  |  | 5.00 | % |  | 2/28/2023
|  | $ | 169,205 |  |  | $ | 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).
Int erest payable at March 31, 2022 and December 31, 2021, was $1,636 and $1,147, respectively. We capitalized interest of $803 and $858 during the three months ended March 31, 2022 and 2021, respectively.
As of March 31, 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 may require 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. T he 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 on foreign currency transactions of $3,772 and $7,617 for the three months ended March 31, 2022 and 2021, respectively.
The outstanding balance of our Bonds at March 31, 2022 and December 31, 2021 is as follows:

Bond Issuance |  | March 31, 2022 |  | December 31, 2021 |  | Interest Rate |  | Maturity
Series A Bonds(1) |  | $ | 48,151 |  |  | $ | 65,563 |  |  | 7.30 | % |  | 7/31/23
Series B Bonds(1) |  | 46,285 |  |  | 54,019 |  |  | 6.80 | % |  | 7/31/25
Series C Bonds(2) |  | 73,732 |  |  | 75,298 |  |  | 4.65 | % |  | 1/31/23
|  | 168,168 |  |  | 194,880 |  |  |  |  |
Less unamortized deferred issuance costs |  | (4,597) |  |  | (5,428) |  |  |  |  |
|  | $ | 163,571 |  |  | $ | 189,452 |  |  |  |  |

(1) The bonds are collateralized by the assets of SPC.
(2) The bonds are collateralized by a trust deed in 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 appro ximately 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 $256 and $242 for the three months ended March 31, 2022 and 2021, respectively, for office space leased to Pillar and Regis.
Property operating expense includes $117 and $382 for the three months ended March 31, 2022 and 2021, respectively, for management fees on commercial properties payable to Regis.
General and administrative expense includes $1,390 and $1,670 for the three months ended March 31, 2022 and 2021, respectively, for employee compensation and other reimbursable costs payable to Pillar.
Advisor fees paid to Pillar were $3,185 and $2,436 for the three months ended March 31, 2022 and 2021, respectively.
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. Interest income on these notes was $4,930 and $4,769 for the three months ended March 31, 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)
Interest expense on notes payable to Pillar was $1,505 and $1,395 for the three months ended March 31, 2022 and 2021, respectively.
Receivable from related party represents the 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 months ended March 31, 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 three months ended March 31, 2022 that had previously been deferred.
As of March 31, 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, o ur 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 March 31,
|  |  |  |  |  | 2022 |  | 2021
Current |  |  |  |  |  | $ | 28 |  |  | $ | 40 |
Deferred |  |  |  |  |  | — |  |  | — |
|  |  |  |  |  | $ | 28 |  |  | $ | 40 |

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 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.
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AMERICAN REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(Unaudited)
In February 2019, we were charged in a lawsuit brought by Paul Berger (“Berger”) that alleges that TCI completed improper sales and/or transfers of property with IOR. Berger requests that TCI pay off various related party loans to IOR and that IOR then distribute the funds to its shareholders. We intend to vigorously defend against the allegations. The trial for this matter is scheduled for November 2022.
18 Subsequent Events
The date to which events occurring after March 31, 2022, the date of the most recent balance sheet, have been evaluated for possible adjustment to the consolidated financial statements or disclosure is May 13, 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 three months ended December 31, 2021 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:
Acquisitions and 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.
•During the three months ended March 31, 2022, we sold a total of 8.6 acres of land from our holdings in Windmill Farms for $2.3 million, in aggregate, resulting in gains on sale of $2.0 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 "Acquisitions and Dispositions").
•On January 14, 2022, the loan on Toulon was paid off in connection with the sale of the underlying property (See "Acquisitions and 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 three months ended March 31, 2022, we spent $1.9 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 $0.8 million on reimbursable infrastructure investments.
We have investment in nine notes receivable that were issued to fund the development of multifamily properties . As of March 31, 2022, one of the projects was in construction, two were in lease-up and six were stabilized. In 2022, we advanced $8.6 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 a Major Decision with Macquarie to engage a broker and initiate a sale of all the properties held by VAA, which are listed in Item 2. Properties as Joint Venture properties. In connection with the sale, VAA will distribute seven of its existing properties to us (referred to herein as the "Holdback Properties") and we in turn, will contribute one of our properties ("Contributed Property") into the portfolio offered for sale to third-parties. The sales price for the Holdback Properties and Contributed Property will be the estimated value of these properties as stated in the agreement, multiplied by the ratio of the actual sales price of the portion of the VAA Portfolio sold to a third party to the estimated value of the those properties that were provided in the agreement.
Each of the properties in the VAA Portfolio is appraised on an annual basis as part of our filing requirement with the TASE. As of March 31, 2022, the fair value of the VAA Portfolio, based on these appraisals was approximately $1.4 billion. The appraised value reflects an aggregate of individual property appraised value and does not reflect a premium that is sometimes offered in a portfolio sale. These values reflect a compression of cap rates for multifamily properties during the last year. However, there can be no assurances that these values will be realized. The Major Decision agreement will expire on August 1, 2022, if the VAA Portfolio has not been sold.
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 months ended March 31, 2022 to the three months ended March 31, 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 months ended March 31, 2022 and 2021:

|  |  |  | Three Months Ended March 31, |  |
|  |  |  |  |  |  |  | 2022 |  | 2021 |  | Variance
Multifamily Segment |  |  |  |  |  |  |  |  |  |  |  |
Revenue |  |  |  |  |  |  |  | $ | 3,229 |  |  | $ | 3,836 |  |  | $ | (607) |
Operating expenses |  |  |  |  |  |  |  | (1,721) |  |  | (2,123) |  |  | 402 |
|  |  |  |  |  |  |  | 1,508 |  |  | 1,713 |  |  | (205) |
Commercial Segment |  |  |  |  |  |  |  |  |  |  |  |
Revenue |  |  |  |  |  |  |  | 4,252 |  |  | 6,525 |  |  | (2,273) |
Operating expenses |  |  |  |  |  |  |  | (2,307) |  |  | (3,709) |  |  | 1,402 |
|  |  |  |  |  |  |  | 1,945 |  |  | 2,816 |  |  | (871) |
Segment profit |  |  |  |  |  |  |  | 3,453 |  |  | 4,529 |  |  | (1,076) |
Other non-segment items of income (expense) |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  |  |  |  |  |  | (2,349) |  |  | (3,327) |  |  | 978 |
General, administrative and advisory |  |  |  |  |  |  |  | (5,905) |  |  | (5,671) |  |  | (234) |
Interest, net |  |  |  |  |  |  |  | 615 |  |  | (2,094) |  |  | 2,709 |
Loss on extinguishment of debt |  |  |  |  |  |  |  | (1,639) |  |  | — |  |  | (1,639) |
Gain on foreign currency transactions |  |  |  |  |  |  |  | 3,772 |  |  | 7,617 |  |  | (3,845) |
Gain sale or write down of assets |  |  |  |  |  |  |  | 11,148 |  |  | 17,398 |  |  | (6,250) |
Income from joint ventures |  |  |  |  |  |  |  | 5,194 |  |  | 3,336 |  |  | 1,858 |
Other income |  |  |  |  |  |  |  | 278 |  |  | 1,427 |  |  | (1,149) |
Net income |  |  |  |  |  |  |  | $ | 14,567 |  |  | $ | 23,215 |  |  | $ | (8,648) |

Comparison of the three months ended March 31, 2022 to the three months ended March 31, 2021:
Our $8.6 million decrease in net income during the three months ended March 31, 2022 is primarily attributed to the following:
•The $0.9 million decrease in profit from the commercial segment is due to the Disposition Properties.
•The $2.7 million increase in interest, net is primarily due a $1.1 million increase in interest income, a $1.0 million decrease in interest from mortgage notes payable and a $0.5 million decrease in interest on bonds payable. The decrease in interest on the mortgage notes payable is due to the Disposition Properties and the decrease in interest on bonds is due to the lower principal balance outstanding.
•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 "Acquisitions and Dispositions" and "Financing Activities" in Management's Overview).
•The decrease in gains on foreign currency transactions is due to changes in the U.S. Dollar and the New Israeli Shekel conversion rate.
•The decrease in gain sale or write down of assets is due to the a decrease in the sale of land at Windmill Farms.
•The $1.9 million increase in income from joint ventures is due to the increase in occupancy of various lease-up properties at VAA.
•The decrease in other income relates to the recovery of bad debts in 2021.
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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 March 31, 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 intend to 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):

| Three Months Ended March 31, |  |
| 2022 |  | 2021 |  | Incr /(Decr)
Net cash used in operating activities | $ | (4,186) |  |  | $ | (1,449) |  |  | $ | (2,737) |
Net cash provided by investing activities | $ | 5,646 |  |  | $ | 14,645 |  |  | $ | (8,999) |
Net cash used in financing activities | $ | (38,769) |  |  | $ | (25,155) |  |  | $ | (13,614) |

The decrease in cash used in operating activities is primarily due to the $3.8 million decrease in distributions of income from unconsolidated joint venture.
The decrease in cash provided by investing activities is primarily due an increase in purchase of short-term investments of $16.6 million, a decrease in collection of notes receivable of $8.2 million and a decrease in distribution from joint venture of $7.4 million offset in part by an increase in proceeds from sale of assets of $14.1 million and a increase in originations and advances on notes receivable of $9.9 million.
The increase in cash used in financing activities is primarily due to the $13.0 million increase in payments of mortgages, notes and bonds payable. The increase in payments of mortgages, notes and bonds payable is due to the pay off of the loan on Toulon in connection with the sale of the underlying property (See "Financing Activities" in Management's Overview).
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.
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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 our net (loss) income attributable to the Company to FFO and FFO-basic and diluted, excluding gain from foreign currency transactions for the three months ended March 31, 2022 and 2021 (dollars and shares in thousands):

|  |  | Three Months Ended March 31,
|  |  |  |  | 2022 |  | 2021
Net income attributable to the Company |  |  |  |  | $ | 11,314 |  |  | $ | 18,068 |
Depreciation and amortization |  |  |  |  | 2,349 |  |  | 3,327 |
Gain on sale or write down of assets |  |  |  |  | (11,148) |  |  | (17,398) |
Gain on sale of land |  |  |  |  | 1,989 |  |  | 5,957 |
Depreciation and amortization on unconsolidated joint ventures at pro rata share |  |  |  |  | (2,579) |  |  | (1,870) |
FFO-Basic and Diluted |  |  |  |  | 1,925 |  |  | 8,084 |
Loss on extinguishment of debt |  |  |  |  | 1,639 |  |  | — |
Gain on foreign currency transactions |  |  |  |  | (3,772) |  |  | (7,617) |
FFO-adjusted |  |  |  |  | $ | (208) |  |  | $ | 467 |

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
None
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.
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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 three months ended March 31, 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 three months ended March 31, 2022. As of March 31, 2022, 986,750 shares have been purchased and 263,250 shares may be purchased under the program.
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
3.0 |  | Certificate 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).
3.1 |  | Certificate 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).
3.2 |  | Articles 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).
3.3 |  | Articles 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).
3.4 |  | Bylaws 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).
4.1 |  | Certificate 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).
4.2 |  | Certificate 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).
4.3 |  | Certificate 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).
4.4 |  | Certificate 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).
4.5 |  | Certificate 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).
10.1 |  | Advisory 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).
10.2 |  | Second 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).
31.1* |  | Certification by the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
31.2* |  | Certification by the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
32.1* |  | 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.INS |  | XBRL Instance Document
101.SCH |  | XBRL Taxonomy Extension Schema Document
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF |  | XBRL Taxonomy Extension Definition Linkbase Document
101.LAB |  | XBRL Taxonomy Extension Label Linkbase Document
101.PRE |  | XBRL 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: May 13, 2022 | By: | /s/ ERIK L. JOHNSON
|  | Erik L. Johnson Executive Vice President and Chief Financial Officer

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