American Realty Investors, Inc.

What they do

American Realty Investors, Inc. (ARL) is a fully integrated, externally managed real estate company focused on multifamily and commercial properties in the Southern United States. It also invests in mortgage notes receivable and land held for appreciation or development. Substantially all operations are conducted through Transcontinental Realty Investors, Inc. (TCI), of which ARL owns approximately 78.4%. ARL has no employees; management services are provided by Pillar Income Asset Management, Inc., a related party.

Revenue drivers

• Multifamily properties — Thirteen operating properties with 2,128 units, three in lease-up with 672 units, and one under development with 234 units; rental revenue increased $0.5 million in Q2 2026 due to lease-up.
• Commercial properties — Four office buildings with approximately 1,001,549 rentable square feet; revenue increased $0.2 million in Q2 2026 mainly due to higher occupancy at Stanford Center.
• Land sales and development — Approximately 1,792 acres of land; sold 21 lots at Windmill Farms in Q2 2026 for $1.0 million, with a gain of $0.8 million.
• Interest income and mortgage notes receivable — Interest income was $2.8 million in Q2 2026, but decreased $1.6 million from the prior year period.

Recent performance

For Q2 2026, ARL reported a net loss attributable to common shares of $1.0 million ($0.06 per share), compared to net income of $2.8 million ($0.18 per share) in Q2 2025. Revenue increased to $12.9 million from $12.2 million, but net operating loss widened to $2.5 million from $1.0 million, driven by higher operating expenses at lease-up properties. The full-year 2025 net income was $15.7 million ($0.97 per share) on revenue of $50.0 million. Cash and equivalents stood at $10.8 million as of June 30, 2026.

Strategy

ARL's strategy is to acquire existing income-producing properties and develop new properties on land already owned or acquired. Recent dispositions include selling a 200-unit multifamily property (Villas at Bon Secour) for $28.0 million and selling land parcels to generate proceeds used to pay off debt, such as the $10.8 million loan on 770 South Post Oak. The company is focused on leasing up its development properties (Alera, Bandera Ridge, Merano) to improve occupancy and rental revenue.

Risks

• External management conflicts — ARL is managed by Pillar, a wholly-owned subsidiary of controlling stockholder RAI, which also manages TCI and IOR, creating potential conflicts in allocating investment opportunities.
• Concentration in Southern U.S. real estate — Performance is subject to regional economic conditions, tenant demand, and supply of multifamily and commercial space, which could affect occupancy and rental rates.
• Leverage and financing costs — The company has long-term debt of $218.0 million and relies on external financing; higher interest rates or reduced credit availability could increase costs and limit growth.
• Operating losses from lease-up properties — Lease-up properties are incurring higher operating expenses without corresponding rental income, as evidenced by a $1.6 million increase in operating expenses in Q2 2026.

Outlook

Management is focused on completing lease-up of its multifamily development properties and improving occupancy, particularly at commercial properties like Stanford Center. The company continues to evaluate dispositions of land and other assets to fund debt repayment and operations. No forward-looking guidance was provided in the latest filings.