American Realty Investors (ARL) 8-K American Realty Investors, Inc. Reports Second Quarter 2006 Results

EXHIBIT 99.1

NEWS RELEASE   FOR IMMEDIATE RELEASE   Contact: American Realty Investors, Inc. Investor Relations (800) 400-6407 investor.relations@primeasset.com

American Realty Investors, Inc. Reports Second Quarter 2006 Results

DALLAS (August 14, 2006) -- American Realty Investors, Inc. (NYSE: ARL), a Dallas-based real estate investment company, announced today that the Company reported net income of $143,000 and a net loss of $(8.5) million, or $0.01 and $(0.84) per share, for the three and six months ended June 30, 2006, compared to a net loss of $(3.4) million and net income of $16.7 million, or $(0.33) and $1.26 per share, in the same periods in 2005.

Operating income for the three and six months ended June 30, 2006 was $3.6 million and $8.5 million, respectively, compared to $1.4 million and $3.7 million for the same periods in 2005. Operating highlights are as follows:

·   Increases in rental revenues to $46.5 million and $92.3 million in 2006, from $42.2 million and $82.4 million in 2005. The increase was primarily attributable to completed apartment construction and the Company’s August 2005 acquisition of the 600 Las Colinas building in Dallas, Texas.

·   Increases in property operations expenses to $31.2 million and $60.8 million in 2006, from $29.5 million and $57.8 million in 2005. The increase was primarily attributable to the August 2005 acquisition of the 600 Las Colinas building in Dallas, Texas and completed apartment construction.

Gain on land sales for the three and six months ended June 30, 2006 was $10.7 million and $13.4 million, respectively, compared to $4.9 million and $29.1 million for the same periods in 2005. For 2006, the Company sold 238 acres in nine transactions at an average sales price of $172,000 per acre. In 2005, the Company sold 321 acres in 13 transactions at an average sales price of $200,000 per acre. The 2005 activity included the sale of 149 acres, all located in southern California, in seven separate transactions at an average sales price of $253,000 per acre.

Interest expenses increased to $20.2 million and $38.9 for the three and six months ended June 30, 2006, compared to $15.4 million and $31.2 million for the same periods in 2005. The increase is due to additional debt incurred related to acquisitions in the last six months of 2005 and the first six months of 2006 offset by debt retired from asset sales. Increases in variable interest rates also contributed to the overall increase in interest expense.

Income from discontinued operations was $3.3 million and $2.4 million for the three and six months ended June 30, 2006, compared to $3.0 million and $13.7 million for the same periods in 2005. For the six months ended June 30, 2006, the Company sold two apartment projects containing 290 units for an average sales price of $32,000 per unit, generating gains of $3.3 million. For the same period in 2005, the Company sold one apartment project containing 200 units for $32,000 per unit, generating a gain of $56,000. In 2005, the Company also sold five commercial projects containing 412,000 square feet at an average sale price of $89 per square foot, generating gains of $14.5 million and cash proceeds of $14.3 million.

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. For more information, go to ARI’s web site at www.amrealtytrust.com

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AMERICAN REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

	June 30, 2006			December 31, 2005
Assets	(Unaudited)
Real estate held for investment	$	1,090,273		$	1,025,661
Less—accumulated depreciation		(165,934	)		(153,597	)
		924,339			872,064
Real estate held for sale		137,996			172,303
Real estate subject to sales contract		66,827			68,738
Notes and interest receivable
Performing ($29,702 in 2006 and $44,500 in 2005 from affiliates)		48,256			70,894
Non-performing		12,280			11,546
		60,536			82,440
Less—allowance for estimated losses		(1,000	)		(1,000	)
		59,536			81,440
Restaurant equipment		14,226			13,911
Less—accumulated depreciation		(8,137	)		(7,528	)
		6,089			6,383
Marketable securities, at market value		8,309			7,446
Cash and cash equivalents		16,383			13,904
Investments in equity investees		13,788			13,521
Goodwill		11,858			11,858
Other intangibles, net of accumulated amortization ($1,300 in 2006 and $926 in 2005)		1,422			1,449
Other assets (including $51,066 in 2006 and $30,441 in 2005 due from affiliate)		111,231			96,689
	$	1,357,778		$	1,345,795
Liabilities and Stockholders’ Equity
Liabilities:
Notes payable ($8,389 in 2006 and $44,848 in 2005 to affiliates)	$	840,214		$	810,118
Interest payable ($549 in 2006 and $682 in 2005 to affiliates)		7,598			7,826
Liabilities related to assets held-for-sale		129,097			144,555
Liabilities subject to sales contract		58,347			59,323
Stock-secured notes payable		22,452			22,549
Accounts payable and other liabilities ($5,839 in 2006 and $4,667 in 2005 to affiliates)		90,444			93,842
		1,148,152			1,138,213
Commitments and contingencies
Minority interest		69,105			59,185
Stockholders’ equity:
Preferred Stock, $2.00 par value, authorized 50,000,000 shares, issued and outstanding
Series A Cumulative Convertible Preferred Stock, 3,390,913 shares in 2006 and 2005 (liquidation preference $33,909), including 900,000 shares in 2006 and 2005 held by subsidiaries		4,982			4,982
Common Stock, $.01 par value, authorized 100,000,000 shares; issued 11,592,272 shares		114			114
Treasury stock, at cost		(15,146	)		(15,146	)
Additional paid-in capital		93,389			93,389
Retained earnings		56,259			64,805
Accumulated other comprehensive income		923			253
		140,521			148,397
	$	1,357,778		$	1,345,795

AMERICAN REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(dollars in thousands, except share data)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2006			2005			2006			2005
Property revenue:
Rental and other property revenues ($517 in 2006 and $363 in 2005  from affiliates)	$	46,461		$	42,247		$	92,328		$	82,371
Restaurant sales		9,388			9,413			18,737			18,033
Total operating revenues		55,849			51,660			111,065			100,404
Expenses:
Property operating expenses ($3,976 in 2006 and $3,306 in 2005 to  affiliates)		31,157			29,516			60,827			57,842
Restaurant cost of sales		6,890			7,140			13,805			13,894
Depreciation and amortization		6,891			5,922			13,617			11,696
General and administrative ($2,550 in 2006 and $2,284 in 2005 to affiliates)		4,130			4,915			8,022			7,666
Advisory fee to affiliate		3,229			2,732			6,310			5,639
Total operating expenses		52,297			50,225			102,581			96,737
Operating income (loss)		3,552			1,435			8,484			3,667
Other income (expense):
Interest income from notes receivable ($828 in 2006 and $1,685 in 2005 from affiliates)		2,092			1,227			3,238			2,803
Gain on foreign currency transaction		2			228			4			228
Other income ($2,085 in 2006 and $1,685 in 2005 from affiliate)		311			885			2,013			1,006
Mortgage and loan interest ($232 in 2006 and $1,107 in 2005 to affiliates)		(20,195	)		(15,392	)		(38,899	)		(31,211	)
Net income fee to affiliate		—			658			—			(819	)
Litigation settlement		1,804			—			1,804			—
Total other expense		(15,986	)		(12,394	)		(31,840	)		(27,993	)
Loss before gain on land sales, minority interest, and equity in earnings of investees		(12,434	)		(10,959	)		(23,356	)		(24,326	)
Gain on land sales		10,668			4,913			13,408			29,091
Minority interest		(798	)		174			32			(746	)
Equity in income (loss) of investees		86			152			261			212
Income (loss) from continuing operations		(2,478	)		(5,720	)		(9,655	)		4,231
Income (loss) from discontinued operations		3,252			3,002			2,354			13,731
Net income (loss)		774			(2,718	)		(7,301	)		17,962
Preferred dividend requirement		(631	)		(649	)		(1,245	)		(1,299	)
Net income (loss) applicable to Common shares	$	143		$	(3,367	)	$	(8,546	)	$	16,663