American Realty Investors, Inc. (ARL): Business Model Canvas [11-2024 Updated]
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American Realty Investors, Inc. (ARL) Bundle
American Realty Investors, Inc. (ARL) operates on a robust business model that combines strategic partnerships, diverse property management, and a focus on long-term growth. With a strong emphasis on multifamily and commercial real estate, ARL leverages key resources and activities to deliver value to its customers and stakeholders. Curious about how ARL structures its operations to drive revenue and maintain customer relationships? Dive deeper into the components of their Business Model Canvas below.
American Realty Investors, Inc. (ARL) - Business Model: Key Partnerships
Development agreements with Pillar
American Realty Investors, Inc. (ARL) has established multiple development agreements with Pillar, a subsidiary of May Realty Holdings, Inc. As of March 15, 2023, ARL entered into a development agreement for a 240-unit multifamily property in Lake Wales, Florida, named Alera, with a total cost of approximately $55.3 million. This project is funded by a $33.0 million construction loan. The agreement includes a $1.6 million fee to Pillar over the construction period, with $31.9 million incurred in development costs as of September 30, 2024.
On November 6, 2023, another agreement was signed with Pillar for a 216-unit multifamily property in McKinney, Texas, named Merano, with a total cost of approximately $51.9 million. Funding includes a $25.4 million construction loan, and Pillar will receive a $1.6 million fee over the construction period. As of September 30, 2024, ARL incurred $15.6 million in development costs.
Additionally, on December 15, 2023, ARL entered into a development agreement for another 216-unit multifamily property in Temple, Texas, named Bandera Ridge, with a total cost of approximately $49.6 million, partially funded by a $23.5 million construction loan and a $1.6 million fee to Pillar.
A final development agreement was established on October 21, 2024, for a 234-unit multifamily property in Dallas, Texas, named Mountain Creek, with a total cost of approximately $49.8 million, supported by a $27.5 million construction loan and a $1.6 million fee to Pillar.
Joint ventures with Macquarie Group
ARL formed a joint venture with the Macquarie Group through Victory Abode Apartments, LLC (VAA). This partnership was initiated on November 16, 2018, when ARL sold a 50% interest in a portfolio of multifamily properties to Macquarie, resulting in a 50% voting interest in VAA. On September 16, 2022, VAA sold 45 properties for $1.81 billion, generating a gain of $738.4 million.
Following the sale, ARL received initial distributions totaling $182.8 million, followed by an additional distribution of $204.0 million when VAA granted operational control of the remaining properties. As of March 23, 2023, ARL received an additional $17.976 million from VAA. The final liquidation of the joint venture is anticipated to be completed by the end of 2024.
Partnerships with financial institutions for loans
ARL collaborates with various financial institutions to secure loans for its development projects. As of September 30, 2024, the company has several active construction loans, including:
| Project | Loan Amount | Interest Rate | Maturity Date |
|---|---|---|---|
| Alera | $33,000,000 | SOFR + 3% | March 15, 2026 |
| Merano | $25,407,000 | Prime + 0.25% | November 6, 2028 |
| Bandera Ridge | $23,500,000 | SOFR + 3% | December 15, 2028 |
| Mountain Creek | $27,500,000 | SOFR + 3.45% | October 20, 2026 |
These loans are instrumental in supporting ARL's growth strategy by providing necessary capital for their multifamily developments.
American Realty Investors, Inc. (ARL) - Business Model: Key Activities
Acquisition and management of multifamily properties
As of September 30, 2024, American Realty Investors, Inc. reported total revenues of $11,074,000 from rental income, a decrease from $11,838,000 in the same period of 2023. The multifamily segment generated revenues of $7,967,000 for the three months ended September 30, 2024, compared to $7,899,000 in the prior year. The company manages a diverse portfolio of multifamily properties, which includes ongoing leasing activities and tenant services that contribute significantly to its revenue stream.
Development of new real estate projects
American Realty has several active development projects, including:
- A 240-unit multifamily property in Lake Wales, Florida, named 'Alera,' with an expected total cost of approximately $55.3 million, funded by a $33 million construction loan.
- A 216-unit multifamily property in McKinney, Texas, named 'Merano,' expected total cost of approximately $51.9 million, funded by a $25.4 million construction loan.
- A 216-unit multifamily property in Temple, Texas, named 'Bandera Ridge,' expected total cost of approximately $49.6 million, funded by a $23.5 million construction loan.
- A 234-unit multifamily property in Dallas, Texas, named 'Mountain Creek,' expected total cost of approximately $49.8 million, funded by a $27.5 million construction loan.
As of September 30, 2024, the company incurred development costs totaling $31.9 million for Alera, $15.6 million for Merano, and $11.1 million for Bandera Ridge.
Property leasing and maintenance
Property operating expenses for the three months ended September 30, 2024, were $6,989,000, down from $7,443,000 in the same period of 2023. The company focuses on maintaining its properties to uphold tenant satisfaction and retention. The multifamily segment reported operating expenses of $4,642,000 for the three months ended September 30, 2024. The company also forecasts future rental payments from non-cancelable leases, totaling $66,076,000 over the coming years.
| Project Name | Location | Units | Total Cost ($ millions) | Construction Loan ($ millions) | Development Costs Incurred ($ millions) |
|---|---|---|---|---|---|
| Alera | Lake Wales, FL | 240 | 55.3 | 33.0 | 31.9 |
| Merano | McKinney, TX | 216 | 51.9 | 25.4 | 15.6 |
| Bandera Ridge | Temple, TX | 216 | 49.6 | 23.5 | 11.1 |
| Mountain Creek | Dallas, TX | 234 | 49.8 | 27.5 | 0.6 |
American Realty Investors, Inc. (ARL) - Business Model: Key Resources
Multifamily and commercial real estate assets
As of September 30, 2024, American Realty Investors, Inc. reported total real estate assets valued at $527,562,000. This includes:
- Land: $104,156,000
- Building and improvements: $374,892,000
- Tenant improvements: $16,503,000
- Construction in progress: $108,112,000
The company’s real estate portfolio primarily consists of multifamily properties and commercial properties, which are managed under operating leases. The future rental payments from non-cancelable leases amount to $66,076,000 through 2028, with the following breakdown:
| Year | Future Rental Payments |
|---|---|
| 2024 | $11,754,000 |
| 2025 | $11,241,000 |
| 2026 | $10,810,000 |
| 2027 | $10,430,000 |
| 2028 | $8,542,000 |
| Thereafter | $13,299,000 |
Financial resources from loans and equity
American Realty Investors, Inc. has leveraged various financial resources to fund its operations and growth. As of September 30, 2024, the company reported:
- Mortgages and other notes payable: $183,814,000
- Total liabilities: $240,232,000
- Total shareholders' equity: $602,172,000
Recent financing activities include:
- A $25.4 million construction loan for the development of Merano, maturing November 6, 2028.
- A $23.5 million construction loan for Bandera Ridge, maturing December 15, 2028.
- A $27.5 million construction loan for Mountain Creek, maturing October 20, 2026.
As of September 30, 2024, the company had cash and cash equivalents of $39,533,000 and restricted cash of $29,588,000.
Expertise in real estate management
The management of American Realty Investors, Inc. focuses on maximizing the value of its multifamily and commercial properties. The company reported a profit from its multifamily segment of $10,589,000 for the nine months ended September 30, 2024, while the commercial segment generated a profit of $2,705,000.
The total profit from segments for the same period was $13,294,000. The company employs a skilled workforce in real estate management, which contributes to operational efficiency and effective tenant services.
American Realty Investors, Inc. (ARL) - Business Model: Value Propositions
Diverse portfolio of rental properties
American Realty Investors, Inc. (ARL) maintains a diverse portfolio consisting of multifamily residential and commercial properties. As of September 30, 2024, ARL reported total real estate assets valued at $527.6 million, compared to $501.6 million at the end of 2023. The company’s multifamily segment generated revenues of $23.9 million for the nine months ended September 30, 2024, a slight increase from $22.9 million in the same period of 2023.
Focus on multifamily and commercial segments
ARL strategically focuses on the multifamily and commercial real estate sectors. For the three months ended September 30, 2024, the multifamily segment achieved a profit of $3.3 million, while the commercial segment reported a profit of $760,000. The total revenue from the commercial segment during the same period was $3.1 million, reflecting a decline from $3.9 million in 2023. This indicates a need for ARL to enhance occupancy rates in its commercial properties, as occupancy declines have negatively impacted revenues.
Potential for long-term capital appreciation
ARL's investment strategy includes developing new properties and enhancing existing ones to capitalize on long-term capital appreciation. The company has entered into multiple development agreements, including a $55.3 million project for a 240-unit multifamily property in Lake Wales, Florida, expected to be completed in 2025. Additionally, as of September 30, 2024, ARL has incurred development costs of $31.9 million for this project. The potential for increased property values supports ARL's value proposition by aligning with investor interests in capital growth.
| Property Segment | Revenue (Q3 2024) | Revenue (Q3 2023) | Profit (Q3 2024) | Profit (Q3 2023) |
|---|---|---|---|---|
| Multifamily | $7.967 million | $7.899 million | $3.325 million | $3.088 million |
| Commercial | $3.107 million | $3.939 million | $760,000 | $1.307 million |
| Total | $11.074 million | $11.838 million | $4.085 million | $4.395 million |
Additionally, the company’s future rental income projections from non-cancelable leases are substantial, totaling $66.1 million through 2028, with $11.8 million expected in 2024. This stable income stream further enhances ARL's value proposition to investors seeking reliability and growth in their investments.
American Realty Investors, Inc. (ARL) - Business Model: Customer Relationships
Long-term leases with residential tenants
American Realty Investors, Inc. (ARL) focuses on leasing its multifamily properties under long-term agreements, typically categorized as operating leases. As of September 30, 2024, the future rental payments from non-cancelable leases are projected as follows:
| Year | Rental Payments ($ thousands) |
|---|---|
| 2024 | 11,754 |
| 2025 | 11,241 |
| 2026 | 10,810 |
| 2027 | 10,430 |
| 2028 | 8,542 |
| Thereafter | 13,299 |
| Total | 66,076 |
The minimum rental revenues recognized on a straight-line basis over the terms of the leases amounted to $11,074, which includes both fixed and variable components for the three months ended September 30, 2024.
Engagement through property management services
ARL actively engages with its tenants through comprehensive property management services. This includes maintaining communication with tenants regarding property-related issues, ensuring timely responses to maintenance requests, and providing updates on property conditions and community events. The revenues from property management services are integral to ARL's operational strategy, with a focus on enhancing tenant satisfaction and retention.
As of September 30, 2024, ARL reported property operating expenses of $6,989 for the three months ended, reflecting the costs associated with maintaining and managing its properties.
Customer support for tenant inquiries and issues
ARL has established a robust customer support framework to handle tenant inquiries and issues effectively. This support system is designed to address various tenant needs, from leasing inquiries to maintenance requests. The company emphasizes tenant satisfaction as a core component of its customer relationship strategy.
In the nine months ended September 30, 2024, ARL's general and administrative expenses were reported at $4,550, which includes costs related to customer support operations.
American Realty Investors, Inc. (ARL) - Business Model: Channels
Direct leasing through property management teams
American Realty Investors, Inc. (ARL) primarily utilizes direct leasing through its property management teams to generate rental revenue. For the nine months ended September 30, 2024, the total rental revenues amounted to $33.541 million, a slight decrease from $34.236 million in the same period of 2023. The fixed component of rental revenue for the three months ended September 30, 2024, was $10.841 million, while the variable component was $233,000.
| Period | Fixed Rental Revenue | Variable Rental Revenue | Total Rental Revenue |
|---|---|---|---|
| Q3 2024 | $10,841,000 | $233,000 | $11,074,000 |
| Q3 2023 | $11,338,000 | $500,000 | $11,838,000 |
| 9M 2024 | $32,667,000 | $874,000 | $33,541,000 |
| 9M 2023 | $32,968,000 | $1,268,000 | $34,236,000 |
Online platforms for property listings
ARL leverages online platforms to enhance visibility and accessibility of its property listings. This channel serves as a critical touchpoint for prospective tenants, providing comprehensive information on available properties. The company has invested in digital marketing strategies to increase engagement and drive leads through these platforms. The utilization of online listings is integral to ARL's strategy, as it aligns with the industry's shift toward digital tools for property management and leasing.
Real estate brokers for commercial leases
In addition to direct leasing and online platforms, ARL collaborates with real estate brokers to facilitate commercial leases. During the nine months ended September 30, 2024, the commercial segment generated revenues of $9.594 million compared to $11.306 million during the same period in 2023. This reflects a strategic approach to broaden market reach and optimize occupancy rates across its commercial properties.
| Period | Commercial Revenue | Operating Expenses | Profit from Commercial Segment |
|---|---|---|---|
| Q3 2024 | $3,107,000 | $2,347,000 | $760,000 |
| Q3 2023 | $3,939,000 | $2,632,000 | $1,307,000 |
| 9M 2024 | $9,594,000 | $6,889,000 | $2,705,000 |
| 9M 2023 | $11,306,000 | $7,583,000 | $3,723,000 |
American Realty Investors, Inc. (ARL) - Business Model: Customer Segments
Residential renters in multifamily properties
American Realty Investors, Inc. (ARL) primarily targets residential renters in multifamily properties. As of September 30, 2024, the revenue from the multifamily segment was $7,967,000 for the three months ended, compared to $7,899,000 for the same period in 2023. For the nine months ended September 30, 2024, the revenue from this segment was $23,947,000, up from $22,930,000 in 2023.
The operating expenses for the multifamily segment were $4,642,000 and $4,811,000 for the three months ended September 30, 2024, and 2023, respectively. For the nine months, the operating expenses were $13,358,000 in 2024 compared to $12,997,000 in 2023.
| Metric | 2024 (Q3) | 2023 (Q3) | 2024 (9M) | 2023 (9M) |
|---|---|---|---|---|
| Revenue | $7,967,000 | $7,899,000 | $23,947,000 | $22,930,000 |
| Operating Expenses | $4,642,000 | $4,811,000 | $13,358,000 | $12,997,000 |
| Profit from Segment | $3,325,000 | $3,088,000 | $10,589,000 | $9,933,000 |
Businesses seeking commercial space
ARL also serves businesses seeking commercial space, which is a significant part of its customer segments. The revenue from the commercial segment was $3,107,000 for the three months ended September 30, 2024, down from $3,939,000 in 2023. For the nine months ended September 30, 2024, revenue was $9,594,000 compared to $11,306,000 for the same period in 2023.
The operating expenses for the commercial segment were $2,347,000 for Q3 2024 versus $2,632,000 in Q3 2023. The nine-month operating expenses were $6,889,000 in 2024, down from $7,583,000 in 2023.
| Metric | 2024 (Q3) | 2023 (Q3) | 2024 (9M) | 2023 (9M) |
|---|---|---|---|---|
| Revenue | $3,107,000 | $3,939,000 | $9,594,000 | $11,306,000 |
| Operating Expenses | $2,347,000 | $2,632,000 | $6,889,000 | $7,583,000 |
| Profit from Segment | $760,000 | $1,307,000 | $2,705,000 | $3,723,000 |
Investors interested in real estate opportunities
ARL also caters to investors interested in real estate opportunities. The company has been active in property acquisition and development, which attracts investors looking for returns through real estate. As of September 30, 2024, total real estate assets amounted to $527,562,000, an increase from $501,586,000 as of December 31, 2023. The company’s investments include multifamily and commercial properties, with ongoing developments expected to enhance its portfolio value.
ARL has also reported a net loss for the three months ended September 30, 2024, amounting to $(17,016,000), compared to a net income of $4,025,000 for the same period in 2023. This loss was primarily driven by a significant loss on real estate transactions, totaling $(23,400,000).
| Metric | As of September 30, 2024 | As of December 31, 2023 |
|---|---|---|
| Total Real Estate Assets | $527,562,000 | $501,586,000 |
| Net Loss | $(17,016,000) | $4,025,000 |
| Loss on Real Estate Transactions | $(23,400,000) | $32,000 |
American Realty Investors, Inc. (ARL) - Business Model: Cost Structure
Property Operating Expenses
The total property operating expenses for American Realty Investors, Inc. as of September 30, 2024, amounted to $20,247,000 for the nine months ended. This includes expenses incurred from related parties, which were $253,000 for the nine months ended September 30, 2024, compared to $296,000 for the same period in 2023. The breakdown for the three months ended September 30, 2024, indicates property operating expenses of $6,989,000.
| Expense Type | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Property Operating Expenses | $6,989,000 | $7,443,000 | $20,247,000 | $20,580,000 |
| Related Party Expenses | $87,000 | $97,000 | $253,000 | $296,000 |
Development and Construction Costs
As of September 30, 2024, American Realty Investors reported development costs incurred for ongoing projects totaling $31,878,000, which includes costs associated with the multifamily property in Lake Wales, Florida, and other developments. For the nine months ended September 30, 2024, the company has committed approximately $24.3 million for the development of 125 acres into land lots. The total development costs for other projects include $15.6 million for the McKinney, Texas project and $11.1 million for the Temple, Texas project.
| Project | Total Cost | Amount Incurred (as of 09/30/2024) |
|---|---|---|
| Lake Wales, Florida (Alera) | $55,330,000 | $31,878,000 |
| McKinney, Texas (Merano) | $51,910,000 | $15,588,000 |
| Temple, Texas (Bandera Ridge) | $49,600,000 | $11,100,000 |
| Dallas, Texas (Mountain Creek) | $49,800,000 | $600,000 |
General and Administrative Expenses
For the nine months ending September 30, 2024, American Realty Investors reported general and administrative expenses of $4,550,000, which includes expenses from related parties amounting to $2,748,000. In comparison, for the same period in 2023, general and administrative expenses were reported at $8,424,000. The three-month period ending September 30, 2024, reflected general and administrative expenses of $1,590,000.
| Expense Type | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| General and Administrative Expenses | $1,590,000 | $1,579,000 | $4,550,000 | $8,424,000 |
| Related Party Expenses | $899,000 | $856,000 | $2,748,000 | $3,095,000 |
American Realty Investors, Inc. (ARL) - Business Model: Revenue Streams
Rental income from properties
American Realty Investors, Inc. generates significant revenue through rental income from its multifamily and commercial properties. For the three months ended September 30, 2024, the total rental revenues amounted to $11,074,000, compared to $11,838,000 for the same period in 2023. For the nine months ended September 30, 2024, the rental revenues were $33,541,000, down from $34,236,000 in 2023.
| Period | Rental Revenue (in thousands) | Fixed Component | Variable Component |
|---|---|---|---|
| Three Months Ended September 30, 2024 | $11,074 | $10,841 | $233 |
| Three Months Ended September 30, 2023 | $11,838 | $11,338 | $500 |
| Nine Months Ended September 30, 2024 | $33,541 | $32,667 | $874 |
| Nine Months Ended September 30, 2023 | $34,236 | $32,968 | $1,268 |
The future rental payments from non-cancelable leases are projected as follows:
| Year | Future Rental Payments (in thousands) |
|---|---|
| 2024 | $11,754 |
| 2025 | $11,241 |
| 2026 | $10,810 |
| 2027 | $10,430 |
| 2028 | $8,542 |
| Thereafter | $13,299 |
| Total | $66,076 |
Advisory and management fees from related parties
American Realty Investors also earns advisory and management fees from related parties. For the three months ended September 30, 2024, advisory fees to related parties totaled $1,971,000, compared to $2,295,000 for the same period in 2023. For the nine months ended September 30, 2024, these fees were $5,910,000, down from $6,883,000 in 2023.
| Period | Advisory Fees (in thousands) |
|---|---|
| Three Months Ended September 30, 2024 | $1,971 |
| Three Months Ended September 30, 2023 | $2,295 |
| Nine Months Ended September 30, 2024 | $5,910 |
| Nine Months Ended September 30, 2023 | $6,883 |
Gains from property sales and joint ventures
American Realty Investors occasionally realizes gains from property sales and joint ventures. For the nine months ended September 30, 2024, the company reported a loss on real estate transactions of $23,400,000, a significant increase compared to a gain of $156,000 for the same period in 2023.
| Period | Real Estate Transaction Gains/Losses (in thousands) |
|---|---|
| Nine Months Ended September 30, 2024 | $(23,400) |
| Nine Months Ended September 30, 2023 | $156 |
Additionally, income from unconsolidated joint ventures for the nine months ended September 30, 2024, was $1,407,000, down from $2,946,000 in 2023.
| Period | Income from Joint Ventures (in thousands) |
|---|---|
| Nine Months Ended September 30, 2024 | $1,407 |
| Nine Months Ended September 30, 2023 | $2,946 |
Updated on 16 Nov 2024
Resources:
- American Realty Investors, Inc. (ARL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of American Realty Investors, Inc. (ARL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View American Realty Investors, Inc. (ARL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.