American Realty Investors, Inc. Reports Third Quarter 2008 Results

American Realty Investors, Inc. a Dallas-based real estate investment company, reported net income for the three months ended September 30, 2008. ARL reported a net loss applicable to common shares of ($8.5 million) or ($0.80) per diluted share for the three months ended September 30, 2008, as compared to a net loss applicable to common shares of ($3.4 million) or ($0.33) per diluted share for the same period ended 2007.

In addition, the Company reported net income for the nine months ended September 30, 2008. ARL reported net income applicable to common shares of $38.3 million or $3.64 per diluted share for the nine months ended September 30, 2008, as compared to a net loss applicable to common shares of ($35.5 million) or ($3.51) per diluted share for the same period ended 2007.

Results of operations for the three months ended September 30, 2008 as compared to the same period ended 2007

Rental and other property revenues increased by $5.3 million for the three months ended September 30, 2008 as compared to the same period ended 2007. The increase consisted of an increase in our apartment portfolio of $3.4 million, an increase in our commercial portfolio of $1.4 million, and an increase in our land portfolio of $0.6 million, offset by a decrease in our hotels of $0.1 million.

Property operating expense increased by $3.7 million for the three months ended September 30, 2008 as compared to the same period ended 2007. The increase consisted of increases in our apartment portfolio of $4.0 million and increases in our hotel portfolio of $0.7 million, offset by decreases in our land and other portfolio of $0.9 million.

Interest expense has decreased by $1.1 million for the three months ended September 30, 2008 as compared to the same period ended 2007. The decrease is due to the sale of several land parcels and a commercial building in the third quarter, thus reducing our debt balance and the associated interest expense.

Gain on land sales decreased by $5.8 million for the three months ended September 30, 2008 as compared to the same period ended 2007. We have sold few parcels of land as compared to prior period.

Minority interest income increased by $2.0 million for the three months ended September 30, 2008 as compared to the same period ended 2007. The increase is due to the recapture of the minority interest expense from the losses incurred in the third quarter.

Equity in income (loss) of investee represents our income portion of loss from investments account for using the equity method. For the three months ended September 2008, our investment in Gruppa Florentina, LLC, and LK Four Hickory Center LLC, had losses, offsetting gains in our other equity investees.

Net income from discontinued operations was $2.4 million for the three months ended September 30, 2008 as compared to a net income from discontinued operations of $5.4 million for the same period ended 2007. Discontinued operations consist of 29 apartments, seven commercial buildings of which one was sold in the third quarter of 2008, and five hotels.

Results of operations for the nine months ended September 30, 2008 as compared to the same period ended 2007

Rental and other property revenues have increased by $10.8 million for the nine months ended September 30, 2008 as compared to the same period ended 2007. The majority of the increase of $13.9 million is from our apartment portfolio. We also had an increase in our commercial portfolio of $0.9 million and an increase in our land portfolio of $1.7 million, offset by a decrease in our hotel portfolio of $0.9 million.

Operating expenses increased by $10.4 million for the nine months ended September 30, 2008 as compared to the same period ended 2007. The apartment and the commercial portfolios accounted for $9.5 million and $1.2 million of the increase, respectively. This increase was offset by a decrease of $0.3 million in our hotel, land and other portfolios.

Provision for allowance on notes receivable and impairment for the nine months ended September 30, 2008 was $12.0 million. We recorded a $5.0 million allowance for doubtful receivables and a $7.0 million allowance for the doubtful collectability of certain investments within our portfolio.

Gain on land sale has decreased by $6.4 million for the nine months ended September 30, 2008 as compared to the same period ended 2007. We have sold fewer parcels of land as compared to prior period.

Equity income in investees is $2.2 million for the nine months September 30, 2008. This amount represents our portion of income from investments account for using the equity method.

Net income from discontinued operations increased by $60.3 million for the nine months ended September 30, 2008 as compared to the same period ended 2007. Discontinued operations consists of 29 apartments of which 18 were sold in 2008, seven commercial buildings of which three were sold in 2008, and five hotels of which four were sold in 2008.

About American Realty Investors, Inc.

American Realty Investors, Inc., a Dallas-based real estate investment company, holds a diverse portfolio of equity real estate located across the U.S., including office buildings, apartments, hotels, shopping centers and developed and undeveloped land. We invest in real estate through direct equity ownership and partnerships nationwide. For more information, go to ARI’s web site at www.amrealtytrust.com.