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SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14a INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

AMERICAN REALTY TRUST, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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AMERICAN REALTY TRUST, INC.
DALLAS, TEXAS

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held January 11, 1999

The Annual Meeting of Stockholders of American Realty Trust, Inc. will be
held on Monday, January 11, 1999, at 2:00 p.m. at 10670 N. Central Expressway,
Suite 600, Dallas, Texas.

The purposes of the Annual Meeting are:

(1) to elect Directors;

(2) to approve our Director Stock Option Plan; and

(3) to transact any other business that may properly come
before the meeting.

You must be a stockholder of record at the close of business on Monday,
December 7, 1998, to vote at the Annual Meeting.

Whether you plan to attend or not, please sign, date and return the
enclosed proxy card in the envelope provided. You may also attend and vote at
the Annual Meeting.

Dated: December 8, 1998

BY ORDER OF THE BOARD OF DIRECTORS

------------------------------------
Robert A. Waldman
Secretary

AMERICAN REALTY TRUST, INC.
DALLAS, TEXAS

PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 11, 1999

This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of American Realty Trust, Inc. (the "Company") of
proxies to be used at the Annual Meeting of Stockholders (the "Annual Meeting")
for a vote upon (1) the election of four Directors, (2) a proposal to approve
the Company's Director Stock Option Plan; and (3) the transaction of such other
business as may properly come before the meeting or any adjournments thereof.
The Annual Meeting will be held at 2:00 p.m., Dallas time, on Monday, January
11, 1999 at 10670 North Central Expressway, Suite 600, Dallas, Texas 75231.

The Company's financial statements for the year ended December 31, 1997
were audited by BDO Seidman. Representatives of BDO Seidman are expected to be
present at the Annual Meeting to respond to appropriate questions, and such
representatives will have an opportunity to make a statement if they desire to
do so. This Proxy Statement and the accompanying proxy are first being mailed
to Stockholders on or about December 8, 1998. The Annual Report to Stockholders
for the year ended December 31, 1997, has been mailed to all Stockholders under
separate cover.

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997 AND OF THE EXHIBITS THERETO, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, MAY BE OBTAINED FREE OF CHARGE BY WRITING TO:

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INVESTOR RELATIONS
AMERICAN REALTY TRUST, INC.
10670 NORTH CENTRAL EXPRESSWAY, SUITE 300
DALLAS, TEXAS 75231

STOCKHOLDERS ENTITLED TO VOTE

Only holders of record of issued and outstanding shares of the
Company's common stock (the "Shares") at the close of business on Monday,
December 7, 1998, (the "Record Date"), are entitled to vote at the Annual
Meeting and at any adjournments thereof. At the close of business on December
7, 1998 there were 10,756,308 Shares outstanding. Each holder is entitled
to one vote for each Share held on the Record Date.

VOTING OF PROXIES

When the enclosed proxy is properly executed and returned, the Shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions noted thereon. As to the election of the four Directors (Proposal
One), Stockholders may choose to vote for the nominees or to withhold authority
for voting for any of the nominees. As to the proposal to approve the Company's
Director Stock Option Plan ("Proposal Two"), Stockholders may choose to vote
for, against or abstain from voting on such proposal. In the absence of other
instructions, the Shares represented by a properly executed and submitted proxy
will be voted in favor of each of the nominees for election to the Board of
Directors and in favor of Proposal Two. The Board of Directors does not know
of any other business to be brought before the Annual Meeting. If, however, any
other matters properly come before the Annual Meeting, it is the intention of
the persons named in the enclosed proxy to vote such proxy in accordance with
their judgment on such matters.

VOTE REQUIRED FOR APPROVAL

Pursuant to Section 3.2 of the By-laws of the Company, election of any
Director requires the affirmative vote of a

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plurality of the votes cast at a meeting of Stockholders at which a quorum is
present and voting. Pursuant to Section 14-2-725 of the Georgia Business
Corporation Code, Proposal Two must be adopted by the affirmative vote of a
plurality of the votes cast at the meeting. Abstentions and broker non-votes, if
any, will not be included in vote totals, and, as such, will have no effect on
any proposal. Section 2.5 of the By-laws of the Company provides that a
majority of the outstanding Shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at any such meeting.

As of November 13, 1998, management and affiliates held 7,219,918
Shares representing approximately 67.1% of the Shares outstanding. Management
intends to vote such Shares for each of the proposals in accordance with the
recommendation of the Board of Directors.

REVOCATION OF PROXIES

A proxy is enclosed herewith. Any Stockholder who executes and
delivers the proxy may revoke the authority granted thereunder at any time
prior to its use by giving written notice of such revocation to American Stock
Transfer and Trust Company, 40 Wall Street, 46th Floor, New York, New York
10005, or by executing and delivering a proxy bearing a later date. A
STOCKHOLDER MAY ALSO REVOKE A PROXY BY ATTENDING AND VOTING AT THE ANNUAL
MEETING.

FUTURE PROPOSALS OF STOCKHOLDERS

Any proposal intended to be presented by a Stockholder at the 1999
Annual Meeting of Stockholders of the Company must be received at the principal
office of the Company not later than March 31, 1999, in order to be considered
for inclusion in the Company's proxy statement and form of proxy for that
meeting.

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PROPOSAL ONE:
ELECTION OF DIRECTORS

NOMINEES

The following persons have been nominated to serve as Directors of the
Company: Karl L. Blaha, Roy E. Bode, Al Gonzalez and Cliff
Harris. Each of the four nominees is currently a Director of the Company and
has been nominated by the Board of Directors to serve for an additional term
until the next Annual Meeting of Stockholders or until his successor shall have
been duly elected and qualified. Each nominee has consented to being named in
this Proxy Statement as a nominee and has agreed to serve as a Director if
elected. When a proxy is properly executed and returned, the Shares
represented thereby will be voted in favor of the election of each of the
nominees, unless authority to vote for any such nominee is specifically
withheld. There will be no cumulative voting for the election of Directors.
If any nominee is unable to serve or will not serve (an event which is not
anticipated), then the person acting pursuant to the authority granted under
the proxy will cast votes for the remaining nominees and, unless the board of
Directors takes action to reduce the number of Directors, for such other
person(s) as he or she may select in place of such nominee(s).

The four nominees are listed below, together with their ages, terms of
service, all positions and offices with the Company or the Company's advisor,
Basic Capital Management, Inc. ("BCM"), other principal occupations, business
experience and directorships with other companies during the last five years or
more. The designation "Affiliated", when used below with respect to a
Director, means that the Director is an officer, director or employee of BCM,
or an officer of the Company. The designation "Independent", when used below
with respect to a Director, means that the Director is neither an officer of
the Company nor a director, officer or employee of BCM, although the Company
may have certain business or professional relationships with such Director, as
discussed below under "Certain Business Relationships and Related
Transactions".

NAME, PRINCIPAL OCCUPATIONS,
BUSINESS EXPERIENCE AND DIRECTORSHIPS

AGE
---

KARL L. BLAHA: Director (Affiliated) (since 1996). 51
President (since October 1993) and
Executive Vice President and Director
of Commercial Management (April 1992
to October 1993).

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Executive Vice President and Director of Commercial Management (April
1992 to August 1995) and Executive Vice President - Commercial Asset
Management (since July 1997) of BCM, Transcontinental Realty
Investors, Inc. ("TCI"), Continental Mortgage and Equity Trust
("CMET"), Income Opportunity Realty Investors, Inc. ("IORI") and
Syntek Asset Management, Inc. ("SAMI"), the managing general partner
of Syntek Asset Management, L.P. ("SAMLP"), which is the general
partner of National Realty, L.P. ("NRLP") and National Operating, L.P.
("NOLP") and a corporation owned by BCM; Director (since November
1998) of SAMI; Executive Vice President (October 1992 to July 1997) of
Carmel Realty, Inc. ("Carmel Realty"), a company affiliated with BCM
which provides real estate brokerage services and commercial property
management services; Executive Vice President and Director of
Commercial Management (April 1992 to February 1994) of National Income
Realty Trust ("NIRT") and Vinland Property Trust ("VPT"); Partner -
Director (August 1988 to March 1992) of National Real Estate
Operations of First Winthrop Corporation; and Corporate Vice President
(April 1984 to August 1988) of Southmark Corporation ("Southmark").

ROY E. BODE: Director (Independent) (since 1996). 50

Vice President of Public Affairs (since May 1992) of
University of Texas Southwestern Medical Center; Editor
(June 1988 to December 1991) of Dallas Times Herald; and
Executive Board Member (since October 1996) of Yellow
Rose Foundation for Multiple Sclerosis Research.

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AL GONZALEZ: Director (Independent) (since 1989). 61

President (since March 1991) of AGE Refining, Inc.;
President (January 1988 to March 1991) of Moody-Day
Inc.; owner and President of Gulf-Tex Construction
Company; owner and lessor of two restaurant sites in
Dallas, Texas; Director (since April 1990) of Avacelle, Inc.
("Avacelle"); and Director (1988 to 1992) of Greenbriar Corp.

On March 18, 1992, Avacelle filed a voluntary petition
under Chapter 11 of the United States Bankruptcy Code and
an Order confirming its Plan of Reorganization was entered
October 18, 1993 by the United States Bankruptcy Court,
Northern Division of Oklahoma. On April 22, 1997, Avacelle
again filed a voluntary petition under Chapter 11 of the
United States Bankruptcy Code.

CLIFF HARRIS: Director (Independent) (since 1997). 49

President (since 1995) of Energy Transfer Group, L.L.C.;
Project Development Vice President (1990 to 1995) of
Marsh & McLennan; Vice Chairman (1990-1997) of the Dallas
Rehabilitation Institute; Director (since 1992) of Court
Appointed Special Advocates; and Director (since 1989) of
the NFL Alumni Association.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EACH
OF THE NOMINEES NAMED ABOVE.

BOARD MEETINGS AND COMMITTEES

The Company's Board of Directors held seventeen meetings during 1997.
For such year, no incumbent Director attended fewer than 75% of (i) the total
number of meetings held by the Board during the period for which he had been a
Director and (ii) the total number of meetings held by all committees of the
Board on which he served during the periods that he served.

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The Board of Directors has an Audit Committee, the function of which
is to review the Company's operating and accounting procedures. The current
members of the Audit Committee are Messrs. Gonzalez (Chairman)and Bode. The
Audit Committee met three times during 1997.

The Company's Board of Directors does not have nominating or
compensation committees.

EXECUTIVE OFFICERS

The following persons currently serve as executive officers of the
Company: in addition to Karl L. Blaha, Bruce A. Endendyk, Executive Vice
President; Thomas A. Holland, Executive Vice President and Chief Financial
Officer; Steven K. Johnson, Executive Vice President - Residential Asset
Management; and Randall M. Paulson, Executive Vice President. Their positions
with the Company are not subject to a vote of Stockholders. The age, terms of
service, all positions and offices with the Company or BCM, other principal
occupations, business experience and directorships with other companies during
the last five years or more of Messrs. Endendyk, Holland and Paulson is set
forth below.

NAME, PRINCIPAL OCCUPATIONS,
BUSINESS EXPERIENCE AND DIRECTORSHIPS

AGE
---

BRUCE A. ENDENDYK: Executive Vice President (since 50
January 1995).

President (since January 1995) of Carmel Realty;
Executive Vice President (since January 1995) of BCM,
SAMI, CMET, IORI and TCI; Management Consultant (November
1990 to December 1994); Executive Vice President (January
1989 to November 1990) of Southmark; and President and Chief
Executive Officer (March 1988 to January 1989) of
Southmark Equities Corporation.

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THOMAS A. HOLLAND: Executive Vice President and Chief 56
Financial Officer (since August
1995) and Senior Vice President and
Chief Accounting Officer (July
1990 to August 1995).

Executive Vice President and Chief Financial Officer (since August
1995) and Senior Vice President and Chief Accounting Officer (July 1990
to August 1995) of BCM, SAMI, TCI, CMET and IORI; Secretary (since
February 1997) of TCI, CMET and IORI; and Senior Vice President and
Chief Accounting Officer (July 1990 to February 1994) of NIRT and VPT.

STEVEN K. JOHNSON: Executive Vice President - Residential
Asset Management (since August 1998). 41

Executive Vice President - Residential Asset Management (since August
1998) of BCM, SAMI, CMET, IORI and TCI; Chief Operating Officer
(January 1993 to August 1998) of Garden Capital, Inc.; Executive Vice
President (December 1994 to August 1998) of Garden Capital Management,
Inc.; Vice President (August 1991 to January 1993) of SHL Properties
Realty Advisors, Inc. and SHL Acquisition Corporation II and III; and
Vice President (August 1990 to August 1991) of BCM, SAMI, CMET, IORI,
TCI, NIRT and VPT.

RANDALL M. PAULSON: Executive Vice President (since 52
January 1995).

President (since August 1995) and Executive Vice President (January
1995 to August 1995) of SAMI, CMET, IORI and TCI and (October 1994 to
August 1995) of BCM; Director (August 1995 to November 1998) of SAMI;
Vice President (1993 to 1994) of GSSW, LP, a joint venture of Great
Southern Life and Southwestern Life; Vice President (1990 to 1993) of
Property Company of America Realty, Inc.; and President (1990) of
Paulson Realty Group.

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OFFICERS

Although not executive officers of the Company, the following persons
currently serve as officers of the Company: Robert A. Waldman, Senior Vice
President, General Counsel and Secretary; and Drew D. Potera, Vice President and
Treasurer. Their positions with the Company are not subject to a vote of
Stockholders. Their ages, terms of service, all positions and offices with the
Company or BCM, other principal occupations, business experience and
directorships with other companies during the last five years or more are set
forth below.

NAME, PRINCIPAL OCCUPATIONS,
BUSINESS EXPERIENCE AND DIRECTORSHIPS

AGE
---

ROBERT A. WALDMAN: Senior Vice President and General 46
Counsel (since January 1995),
Secretary (since December 1989)
and Vice President (January 1993
to January 1995).

Senior Vice President and General Counsel (since January 1995),
Vice President (since December 1990) and Secretary (December
1993 to February 1997) of CMET, IORI and TCI; Senior Vice
President and General Counsel (since November 1994), Vice
President and Corporate Counsel (November 1989 to November 1994)
and Secretary (since November 1989) of BCM; Senior Vice
President and General Counsel (since January 1995), Vice
President (April 1990 to January 1995) and Secretary (since
December 1990) of SAMI; and Vice President (December 1990 to
February 1994) and Secretary (December 1993 to February 1994)
of NIRT and VPT).

DREW D. POTERA: Vice President (since December 1996) 39
Treasurer (since August 1991) and
Assistant Treasurer (December 1990
to August 1991).

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Vice President (since December 1996) and Treasurer (since December
1990) of IORI, CMET and TCI; Vice President, Treasurer and Securities
Manager (since July 1990) of BCM; Vice President and Treasurer (since
February 1992) of SAMI; Treasurer (December 1990 to February 1994) of
NIRT and VPT; and Financial Consultant (June 1985 to June 1990) with
Merrill Lynch, Pierce, Fenner & Smith, Incorporated.

In addition to the foregoing officers, the Company has several vice
presidents and assistant secretaries who are not listed herein.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.

Under the securities laws of the United States, the Company's
Directors, executive officers, and any persons holding more than 10 percent of
the Company's Shares of Common Stock are required to report their ownership of
the Company's Shares and any changes in that ownership to the Securities and
Exchange Commission (the "Commission") and the New York Stock Exchange.
Specific due dates for these reports have been established and the Company is
required to report any failure to file by these dates during 1997. All of
these filing requirements were satisfied by the Company's Directors and
executive officers and 10 percent holders. In making these statements, the
Company has relied on the written representations of its incumbent Directors
and executive officers and its 10 percent holders and copies of the reports
that they have filed with the Commission.

THE ADVISOR

Although the Company's Board of Directors is directly responsible for
managing the affairs of the Company and for setting the policies which guide
it, the day-to-day operations of the Company are performed by BCM, a
contractual advisor under the supervision of the Company's Board of Directors.
The duties of the advisor include, among other things, investigating,
evaluating and recommending real estate and mortgage loan investment
opportunities as well as financing and refinancing sources for the Company.
The

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advisor also serves as a consultant in connection with the Company's business
plan and investment policy decisions made by the Company's Board of Directors.

BCM has served as advisor to the Company since February 1989. BCM is
a company owned by a trust for the benefit of the children of Gene E. Phillips,
who served as the Chairman of the Board and a Director of the Company until
November 16, 1992. Gene E. Phillips also served as a director of BCM until
December 22, 1989 and as Chief Executive Officer of BCM until September 1,
1992. Ryan T. Phillips, the son of Gene E. Phillips and a Director of the
Company until June 1996, is also a director of BCM and a trustee of the trust
for the benefit of the children of Mr. Phillips which owns BCM. Mr. Blaha,
the President and a Director of the Company, serves as Executive Vice
President-Commercial Asset Management of BCM. Mr. Paulson, an Executive Vice
President of the Company, also serves as President of BCM, SAMI, CMET, IORI
and TCI.

Gene E. Phillips serves as a representative of the trust, for the
benefit of his children, which owns BCM and, in such capacity, has substantial
contact with the management of BCM and input with respect to BCM's performance
of advisory services to the Company. As of November 13, 1998, BCM owned
5,700,572 shares of the Company's Common Stock, approximately 53.0% of the
Shares then outstanding.

The Advisory Agreement provides for the advisor to receive monthly
base compensation at the rate of 0.125% (1.5% on an annualized basis) of the
average of the aggregate book value of the Company's assets invested in equity
interests in and loans secured by real estate before non-cash reserves (the
"Average Invested Assets").

On October 23, 1991, based on the recommendation of BCM, the Company's
Board of Directors approved a reduction in the advisor's base fee by 50%
effective October 1, 1991. This reduction remains in effect until the
Company's earnings for the four preceding quarters equals or exceeds $.50 per
share.

In addition to base compensation, BCM or an affiliate of BCM, receives
the following forms of additional compensation:

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(a) an acquisition fee for locating, leasing or
purchasing real estate for the Company in an amount equal to the
lesser of (i) the amount of compensation customarily charged in
similar arm's-length transactions or (ii) up to 6% of the costs of
acquisition, inclusive of commissions, if any, paid to nonaffiliated
brokers;

(b) a disposition fee for the sale of each equity
investment in real estate in an amount equal to the lesser of (i) the
amount of compensation customarily charged in similar arm's-length
transactions or (ii) 3% of the sales price of each property, exclusive
of fees, if any, paid to non-affiliated brokers;

(c) a loan arrangement fee in an amount equal to 1% of
the principal amount of any loan made to the Company arranged by BCM;

(d) an incentive fee equal to 10% of net income for the
year in excess of a 10% return on stockholders' equity, and 10% of the
excess of net capital gains over net capital losses, if any, realized
from sales of assets; and

(e) a mortgage placement fee, on mortgage loans
originated or purchased, equal to 50%, measured on a cumulative basis,
of the total amount of mortgage origination or placement fees on
mortgage loans made by the Company for the fiscal year.

The Advisory Agreement further provides that BCM shall bear the cost
of certain expenses of its employees, excluding fees paid to the Company's
Directors; rent and other office expenses of both BCM and the Company (unless
the Company maintains office space separate from that of BCM); costs not
directly identifiable to the Company's assets, liabilities, operations,
business or financial affairs; and miscellaneous administrative expenses
relating to the performance by BCM of its duties under the Advisory Agreement.

If and to the extent that the Company shall request BCM, or any
director, officer, partner or employee of BCM, to render services to the
Company other than those required to be rendered by BCM under the Advisory
Agreement, such additional services, if performed, will be compensated
separately on terms agreed upon

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between such party and the Company from time to time. The Company has
requested that BCM perform loan administration functions, and the Company and
BCM have entered into a separate agreement, as described below.

The Advisory Agreement automatically renews from year to year unless
terminated in accordance with its terms. The Company's management believes
that the terms of the Advisory Agreement are at least as fair as could be
obtained from unaffiliated third parties.

Pursuant to the Advisory Agreement, BCM is the loan
administration/servicing agent for the Company, under an agreement dated as of
October 4, 1989, and terminable by either party upon thirty days' notice, under
which BCM services most of the Company's mortgage notes and receives as
compensation a monthly fee of 0.125% of the month-end outstanding principal
balances of the loans serviced.

In 1997, the Company paid BCM and its affiliates $2.6 million in
advisory and mortgage servicing fees; $7.6 million in real estate brokerage
commissions; $592,000 in loan arrangement fees and $865,000 in property
management fees paid to subcontractors, other than Carmel Realty. In addition,
as provided in the Advisory Agreement, in 1997 BCM received cost reimbursements
from the Company of $1.8 million.

Situations may develop in which the interests of the Company are in
conflict with those of one or more Directors or officers of the Company in
their individual capacities or of BCM, or of their respective affiliates. In
addition to services performed for the Company, as described above, BCM
actively provides similar services as agent for, and advisor to, other real
estate enterprises, including persons and entities involved in real estate
development and financing, including CMET, TCI and IORI. BCM also performs
certain administrative services for NRLP on behalf of NRLP's general partner,
SAMLP. The Advisory Agreement provides that BCM may also serve as advisor to
other entities. As advisor, BCM is a fiduciary of the Company's public
investors. In determining to which entity a particular investment opportunity
will be allocated, BCM will consider the respective investment objectives of
each entity and the appropriateness of a particular investment in light of each
such entity's existing mortgage note and real estate portfolio and which entity
has had uninvested funds for the longest period of time. To the extent any
particular investment opportunity is appropriate to more than one such entity,
such investment opportunity will be allocated to the entity that has had
uninvested funds for the longest period of time or if appropriate, the
investment may be shared among various entities. See "Certain Business
Relationships and Related Party Transactions - Certain Business Relationships"
below.

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The directors and principal officers of BCM are set forth below:

MICKEY N. PHILLIPS: Director

RYAN T. PHILLIPS: Director

RANDALL M. PAULSON: President

KARL L. BLAHA: Executive Vice President -
Commercial Asset Management

BRUCE A. ENDENDYK: Executive Vice President

THOMAS A. HOLLAND: Executive Vice President and
Chief Financial Officer

STEVEN K. JOHNSON: Executive Vice President -
Residential Asset Management

A. CAL ROSSI, JR.: Executive Vice President

COOPER B. STUART: Executive Vice President

CLIFFORD C. TOWNS, JR.: Executive Vice President -
Finance

DAN S. ALLRED: Senior Vice President -
Land Development

ROBERT A. WALDMAN: Senior Vice President,
General Counsel and Secretary

DREW D. POTERA: Vice President, Treasurer
and Securities Manager

Mickey N. Phillips is the brother of Gene E. Phillips, and Ryan T.
Phillips is the son of Gene E. Phillips. Gene E. Phillips serves as a
representative of the trust established for the benefit of his children which
owns BCM and, in such capacity, has substantial contact with the management of
BCM and input with respect to its performance of advisory services to the
Company. As of November 13, 1998, BCM owned 5,700,572 Shares of the
Company's Common Stock, 53.0% of the Company's then outstanding Shares.

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PROPERTY MANAGEMENT

Since February 1, 1990, affiliates of BCM have provided property
management services to the Company. Currently, Carmel Realty Services, Ltd.
("Carmel, Ltd.") provides property management services for a fee of 5% or less
of the monthly gross rents collected on the properties under management.
Carmel, Ltd. subcontracts with other entities for the provision of the
property-level management services to the Company at various rates. The
general partner of Carmel, Ltd. is BCM. The limited partners of Carmel, Ltd.
are (i) First Equity Properties, Inc. ("First Equity"), which is 50% owned by
BCM (ii) Gene E. Phillips and (iii) a trust for the benefit of the children of
Gene E. Phillips. Carmel, Ltd. subcontracts the property-level management of
the Company's hotels, shopping centers, its office building and the Denver
Merchandise Mart to Carmel Realty, which is a company owned by First Equity.
Carmel Realty is entitled to receive property and construction management fees
and leasing commissions in accordance with the terms of its property-level
management agreement with Carmel, Ltd.

REAL ESTATE BROKERAGE

Affiliates of BCM provide real estate brokerage services to the
Company and receive brokerage commissions in accordance with the Advisory
Agreement.

EXECUTIVE COMPENSATION

The Company has no employees, payroll or employee benefit plans and
pays no compensation to executive officers of the Company. The Directors and
executive officers of the Company who are also officers or employees of the
Company's Advisor are compensated by the Advisor. Such affiliated Directors
and executive officers of the Company perform a variety of services for the
Advisor and the amount of their compensation is determined solely by the
Advisor. BCM does not allocate the cash compensation of its officers among the
various entities for which it serves as advisor.

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The only direct remuneration paid by the Company is to those Directors
who are not officers or employees of BCM or its affiliated companies. Until
April 1, 1998, the Company compensated such Independent Directors at a rate of
$5,000 per year, plus $500 per Board of Directors meeting attended and $300 per
Committee meeting attended. During 1997, $48,673 was paid to Independent
Directors in total Directors' fees for all meetings, as follows: Roy E. Bode,
$14,900; Dale A. Crenwelge, $15,340; Al Gonzalez, $13,100; and Cliff Harris,
$5,333.

Effective April 1, 1998, the Company compensates Independent Directors
at the rate of $20,000 per year, plus $300 per Committee meeting attended. In
addition, the Chairman of the Audit Committee receives an annual fee of $500.

In July 1997, the Company's Board of Directors, including all of the
Independent Directors, approved the Company's 1997 Stock Option Plan (the
"Plan"). The Plan was approved by the Stockholders at the Company's Annual
Meeting held in January 1998. As of December 31, 1997, there were no stock
options outstanding under the Plan.

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Performance Graph

The following graph compares the cumulative total stockholder return on the
Company's shares of Common Stock with the Dow Jones Equity Market Index ("DJ
Equity Index") and the Dow Jones Real Estate Investment Index ("DJ Real Estate
Index"). The comparison assumes that $100 was invested on December 31, 1992, in
shares of the Company's Common Stock and in each of the indices and further
assumes the reinvestment of all dividends. Past performance is not necessarily
an indicator of future performance.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[CHART]

1992 1993 1994 1995 1996 1997

THE COMPANY 100.00 194.02 208.00 236.00 427.92 479.98
DJ EQUITY INDEX 100.00 109.95 110.76 152.49 187.63 251.34
DJ REAL ESTATE INDEX 100.00 117.07 111.35 137.60 184.73 220.96

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Management. The following table sets forth the
ownership of Shares of the Company's Common Stock, both beneficially and of
record, both individually and in the aggregate, for the Directors and executive
officers of the Company, as of the close of business on November 13, 1998.

Amount and Nature
Name of of Beneficial Percent of
Beneficial Owner Ownership Class(1)
- - ------------------- ---------------- ----------

Karl L. Blaha 7,217,154(2)(3) 67.1%
(5)

Roy E. Bode 0

Bruce A. Endendyk 7,217,154(2)(3) 67.1%
(5)

Al Gonzalez 0

Cliff Harris 0

Thomas A. Holland 7,219,918(2)(3) 67.1%
(4)(5)

Steven A. Johnson 7,217,154(2)(3) 67.1%
(5)

Randall M. Paulson 7,217,154(2)(3) 67.1%
(5)

All Directors and Executive 7,219,918(2)(3) 67.1%
Officers as a group (4)(5)
(8 persons)

- - -----------------------

(1) Percentage is based upon 10,756,308 Shares outstanding on November 13,
1998.

(2) Includes 820,850 Shares owned by CMET over which the executive officers of
the Company may be deemed to be beneficial owners by virtue of their
positions as executive officers of CMET. Also includes 195,732 Shares
owned by NOLP over which the executive officers of the Company may be
deemed to be beneficial owners by virtue of their positions as executive
officers of SAMI, the managing general partner of SAMLP, the general
partner of NOLP. The executive officers of the Company disclaim
beneficial ownership of such Shares.

(3) Includes 5,700,572 Shares owned by BCM over which the executive officers
of the Company may be deemed to be beneficial owners by virtue of their
positions as executive officers of BCM. The executive officers of the
Company disclaim beneficial ownership of such Shares.

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(4) Includes 2,432 Shares owned directly over which Thomas A. Holland and his
wife jointly hold voting and dispositive power, and an additional 332
Shares held by Mr. Holland in an individual retirement account.

(5) Includes 500,000 shares owned by ND Investments, Inc., a wholly-owned
subsidiary of the Company.

Security Ownership of Certain Beneficial Owners. The following table sets
forth the ownership of the Company's Common Stock both beneficially and of
record, both individually and in the aggregate, for those persons or entities
known by the Company to be the owner of more than 5% of the Shares of the
Company's Common Stock as of the close of business on November 13, 1998.

Amount and Nature
Name and Address of of Beneficial Percent of
Beneficial Owner Ownership Class(1)
- - ------------------- ----------------- ----------

Basic Capital Management, Inc. 5,700,572 53.0%
10670 N. Central Expressway
Suite 300
Dallas, Texas 75231

Davister Corp./Nanook Partners, L.P. 1,669,436(2) 15.5%
10670 N. Central Expressway
Suite 501
Dallas, Texas 75231

Continental Mortgage and Equity Trust 820,850(3) 7.6%
10670 N. Central Expressway
Suite 300
Dallas, Texas 75231

Ryan T. Phillips 5,798,904(4) 53.9%
10670 N. Central Expressway
Suite 600
Dallas, Texas 75231

(1) Percentage is based on 10,756,308 Shares of Common Stock outstanding
on November 13, 1998.

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(2) Each of the directors of Davister Corp., Ronald F. Akin and Ronald F.
Bruce, may be deemed to be the beneficial owners of such Shares by
virtue of their positions as directors of Davister Corp. The
directors of Davister Corp. disclaim beneficial ownership of such
Shares.

(3) Each of the Trustees of CMET, Richard W. Douglas, Larry E. Harley, R.
Douglas Leonhard, Murray Shaw, Ted P. Stokely, Martin L. White and
Edward G. Zampa, may be deemed to be the beneficial owners of such
Shares by virtue of their positions as Trustees of CMET. The Trustees
of CMET disclaim such beneficiary ownership.

(4) Includes 5,700,572 Shares owned by BCM over which Ryan T. Phillips
may be deemed to be the beneficial owner by virtue of his position as
a director of BCM. Mr. Phillips disclaims beneficial ownership of
such Shares. Also, includes 98,332 Shares owned by the Gene E.
Phillips Children's Trust. Ryan T. Phillips is a beneficiary of such
trust.

CERTAIN BUSINESS RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Policies with Respect to Certain Activities. The By-laws of the
Company, as amended, provide, in accordance with Georgia law, that no contract
or transaction between the Company and one or more of its Directors or
officers, or between the Company and any other corporation, partnership,
association or other organization in which one or more of its Directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for that reason, or solely because the Director or officer
is present at or participates in the meeting of the Company's Board of
Directors or committee thereof which authorizes the contract or transaction, or
solely because his or her votes are counted for such purpose, if one or more of
the following three conditions are met: (i) the material facts as to his or her
interest and as to the contract or transaction are disclosed or are known to
the Company's Board of Directors or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the affirmative vote of
a majority of the disinterested Directors, even though the disinterested
Directors constitute less than a quorum; (ii) the material facts as to his or
her interest and as to the contract or

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transaction are disclosed or are known to the Stockholders entitled to vote
thereon, and the contract or transaction is specifically approved or ratified
in good faith by vote of such Stockholders; or (iii) the contract or
transaction is fair to the Company as of the time it is authorized, approved or
ratified by the Company's Board of Directors, a committee thereof, or the
Stockholders.

The Company's policy is to have such contracts or transactions
approved or ratified by a majority of the disinterested Directors of the
Company with full knowledge of the character of such transactions, as being
fair and reasonable to the Stockholders at the time of such approval or
ratification under the circumstances then prevailing. Such Directors also
consider the fairness of such transactions to the Company. Management believes
that, to date, such transactions have represented the best investments
available at the time and that they were at least as advantageous to the
Company as other investments that could have been obtained.

The Company expects to enter into future transactions with entities
the officers, trustees, directors or stockholders of which are also officers,
Directors or Stockholders of the Company if such transactions would be
beneficial to the operations of the Company and consistent with the Company's
then-current investment objectives and policies, subject to approval by a
majority of disinterested Directors as discussed above.

The Company does not prohibit its officers, Directors, Stockholders or
related parties from engaging in business activities of the types conducted by
the Company.

CERTAIN BUSINESS RELATIONSHIPS

As mentioned above, BCM is a corporation of which Messrs. Blaha,
Endendyk, Holland, Johnson and Paulson serve as executive officers. BCM is
beneficially owned by a trust for the benefit of the children of Gene E.
Phillips, trustee of which is Ryan T. Phillips. Ryan T. Phillips is the son of
Gene E. Phillips and serves as a director of BCM and served as a Director of
the Company until June 1996.

Mr. Paulson, an Executive Vice President of the Company, is the
President of CMET, IORI and TCI, and owes fiduciary duties to such entities as
well as to BCM under the applicable law. CMET, IORI and TCI have the same
relationship with BCM as does the

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Company. In addition, BCM has been engaged to perform certain administrative
functions for NRLP and NOLP. Gene E. Phillips is a general partner of SAMLP,
NRLP's and NOLP's general partner, and until May 1996, served as Chief
Executive Officer and director of SAMLP's managing general partner, SAMI. BCM
is the sole stockholder of SAMI. The Company owns a 96% limited partner
interest in SAMLP.

In March 1994, an entity affiliated with Ryan T. Phillips, a Director
of the Company until June 1996, advanced BCM $893,000 on an unsecured demand
note. The note bears interest at 10% per annum with interest only payable
monthly. In February 1998, an entity affiliated with Ryan T. Phillips advanced
BCM an additional $1.7 million also on an unsecured demand note. This note
bears interest at 7.5% per annum with interest only payable monthly.

BCM has advanced an entity affiliated with Ryan T. Phillips $1.1
million on an unsecured demand note. The note bore interest at 10% per annum
with interest only payable monthly. The note was paid in full in February
1998.

Since February 1, 1990, the Company has contracted with affiliates of
BCM for property management services. Currently, Carmel, Ltd. provides such
property management services. The general partner of Carmel, Ltd. is BCM. The
limited partners of Carmel, Ltd. are (i) First Equity, a company which is 50%
owned by BCM, (ii) Gene E. Phillips and (iii) a trust for the benefit of the
children of Gene E. Phillips. Carmel, Ltd. subcontracts the property-level
management of the Company's hotels, shopping centers, its office building and
the Denver Merchandise Mart to Carmel Realty, Inc., which is a company owned by
First Equity.

Affiliates of BCM provide brokerage services to the Company and
receive brokerage commissions in accordance with the Advisory Agreement.

The Company owns an equity interest in each of CMET, IORI, TCI, NRLP
and SAMLP. In addition, CMET and NRLP own a beneficial interest in the Company
and SAMLP owns a beneficial interest in TCI.

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RELATED PARTY TRANSACTIONS

At December 31, 1996, the Company held a mortgage note receivable
secured by an apartment complex in Merrillville, Indiana, with a principal
balance of $3.5 million. The property is owned by a subsidiary of Davister
Corp., a general partner in a partnership that owns approximately 15.6% of the
Company's outstanding shares of Common Stock. The note matured in December
1996. The Company and borrower agreed to extend the note's maturity date to
December 2000. As additional collateral for this loan, the Company received a
second lien mortgage on another property owned by the Borrower as well as the
Borrower's guarantee of the loan. In May 1997, the note plus accrued but
unpaid interest was paid in full.

BCM has entered into put agreements with certain holders of the Class
A limited partner units of Ocean Beach Partners, L.P. Such Class A units are
convertible into Series D Cumulative Preferred Stock of the Company. The put
price of the Series D Preferred Stock is $20.00 per share plus accrued but
unpaid dividends.

BCM has also entered into put agreements with the holders of the Class
A limited partner units of Valley Ranch Limited Partnership. Such Class A
units are convertible into Series E Cumulative Convertible Preferred Stock of
the Company which is further convertible into Common Stock of the Company. The
put price for the Class A units is $1.00 per unit and the put price for either
the Series E Preferred Stock or the Company's Common Stock is 80% of the
average daily closing price of the Company's Common Stock on the 20 previous
trading days.

BCM has also entered into put agreements with the certain holders of
the Company's Series F Cumulative Convertible Preferred Stock. The put price
for the Series F Preferred Stock is $10.00 per share plus any accrued and
unpaid dividends for up to a maximum of 50,000 shares of Series F Preferred
Stock. On April 1, 1998 the holders exercised the put and BCM purchased the
50,000 shares.

In August 1996, the Company obtained a $2.0 million loan from a
financial institution secured by a pledge of equity securities of CMET, IORI
and TCI owned by the Company and Common Stock of the Company owned by BCM with
a market value at the time of $4.0 million. The Company received $2.0 million
in net cash after the payment of closing costs associated with the loan. The
loan was paid in full by the proceeds of a new $4.0 million loan from another
financial institution secured by a pledge of equity

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securities of CMET, IORI and TCI owned by the Company and Common Stock of the
Company owned by BCM with a market value at the time of $10.4 million. The
Company received $2.0 million in net cash after the payoff of the $2.0 million
loan.

In September 1996, the August 1996 lender made a second $2.0 million
loan. The second loan is also secured by a pledge of equity securities of the
CMET, IORI and TCI owned by the Company and Common Stock of the Company owned
by BCM with a market value of $9.1 million. The Company received $2.0 million
in net cash after payment of closing costs associated with the loan. The loan
matures in December 1998.

In January 1998, the December 1997 lender made a second $2.0 million
loan. This loan is also secured by a pledge of Common Stock of the Company
owned by BCM with a market value at the time of $4.7 million. The Company
received $2.0 million in net cash.

In October 1997, the Company entered into leases with BCM and Carmel
Realty for space at the Company's One Hickory Center Office Building, which is
currently under construction. The BCM lease, effective upon the completion of
the building, is for 50,574 square feet (approximately 50% of the building),
has a term of ten years and provides for annual base rent of $974,000 per year
for the first year or $19.25 per square foot increasing to $1.3 million in the
tenth year or $24.90 per square foot. The Carmel Realty lease, also effective
upon completion of the building, is for 25,278 square feet (approximately 25%
of the building) has a term of 15 years, and provides for annual base rent of
$487,050 per year for the first year or $19.25 per square foot increasing to
$964,000 in the fifteenth year or $38.15 per square foot.

Effective January 1, 1998, Carmel Realty entered into a master lease
for 23,813 square feet of space at the Company's Denver Merchandise Mart. The
lease has a term of three years and provides for annual rent of $358,000 or
$15.00 per square foot.

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PROPOSAL TWO:
APPROVAL OF DIRECTOR STOCK OPTION PLAN

BACKGROUND AND DESCRIPTION

The Board of Directors of the Company has reviewed various
arrangements for compensation of Directors, which do not include a program
enabling Directors who are not also officers or key employees of the Company or
its Advisor to participate in the Company's growth through stock ownership
except for purchases of Shares in the open market. The Board of Directors
believes that a program fostering share ownership by Directors who are
"independent" will promote the long-term financial success of the Company by
attracting and retaining outstanding Directors and providing incentives to such
Directors through grants of Share Options linked to continued improvements in
the Company's earnings.

On May 20, 1998, by unanimous vote of the Board of Directors, the
Company adopted the Directors Stock Option Plan (the "Plan") subject to
approval by the Stockholders of the Company at the next meeting of the
Stockholders, whether Annual or Special, by a majority of votes cast on such
Plan, provided that the total vote cast thereon represents over 50% in interest
of all voting securities of the Company entitled to vote thereon. The Company
does not presently have any formal bonus, profit sharing, pension, retirement,
stock option, stock purchase or deferred compensation plan for any of the
Directors except for the proposed Stock Option Plan.

The Plan will be effective on the date the Plan is approved by the
Stockholders at the Annual Meeting. The principal features of the Plan are
summarized below. THIS SUMMARY, WHICH CONTAINS ALL OF THE MATERIAL FEATURES OF
THE PLAN, IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
PLAN WHICH IS ANNEXED AS APPENDIX TO THIS PROXY STATEMENT.

ADMINISTRATION AND ELIGIBILITY; ADJUSTMENT, AMENDMENT AND TERMINATION

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Because Options to be granted under the Plan are automatic and
non-discretionary, the Plan is largely self administered. To the extent
necessary, the Board of Directors is authorized to administer the Plan. In the
event of a stock dividend, stock split, stock combination or other reduction in
issued shares, merger, consolidation, recapitalization or sale or exchange of
all of the assets or dissolution of the Company, the Board of Directors is
required to adjust the number and type of shares authorized by the Plan and
subject to outstanding grants of Options, as well as Option prices of any
outstanding Stock Options, to prevent in enlargement or dilution of rights.
The Board of Directors may suspend or terminate the Plan at any time or amend
the Plan from time to time without Stockholder approval, but no amendment,
suspension or termination shall impair the rights of any Director under
outstanding Options. However, without Stockholder approval (to the extent
required by law or agreement) no amendment may be made which would (a)
materially increase the number of Shares issuable under the Plan (other than
pursuant to the adjustment provisions described above, (b) materially modify
the requirements as to eligibility for participation, or (c) materially
increase the benefits accruing to Directors under the Plan.

Eligibility for Options under the Plan is limited to Directors of the
Company who, at the time of grant of an Option, are not, and have not been for
at least one year, either an employee or officer of the Company or any of its
Affiliates. As of November 13, 1998, three of the four Directors are eligible
for Options under the Plan. The aggregate number of Shares under the Plan is
40,000 (subject to adjustments in order to prevent enlargement or dissolution as
described above). The Shares are traded on the New York Stock Exchange, Inc.

The following table sets forth the benefits or amounts that will be
received by or allocated to each of the following under the Plan, if it is
approved by the Stockholders and if such benefits or amounts are determinable.

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NAME AND POSITION DOLLAR VALUE ($)(1) NUMBER OF SHARES

Karl L. Blaha, President and Director(2) -0- -0-
Executive Group -0- -0-
Non-executive Director Group(3) -0- 3,000
Non-executive Officer Employee Group(4) -0- -0-

(1) The dollar value of the Options to be granted are not determinable at
this time. Options will be granted at fair market value of the Shares
on the date of grant and any benefit will depend upon a subsequent
increase in the fair market value of the Shares.

(2) All current executive officers, individually and as a group, are not
eligible for Options under the Plan.

(3) Group consists of Messrs. Bode, Gonzalez and Harris, each of whom is an
Independent Director and each of whom is eligible to receive an Option
to purchase 1,000 shares upon the approval of the Plan by the
Stockholders.

(4) All employees, including current officers, who are not executive
officers as a group are not eligible for Options under the Plan.

OPTIONS

Effective at the time of approval by the Stockholders of the Plan, each
Independent Director will automatically be awarded an Option to purchase 1,000
Shares. In addition, for each year such Director continues to serve as a
Director, he will be awarded an option covering 1,000 Shares on January 1 of
each year. All Options are to be granted at "fair market value" (as defined in
the Plan). All Options granted under the Plan will be exercisable for the
lesser of ten years or one year after a Director ceases to serve on the Board of
Directors for any reason, including death. Payment of the exercise price may be
made in cash, in Shares already owned by the individual for at least six months,
or with a combination of cash and Shares.

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FEDERAL INCOME TAX CONSEQUENCES

The Company has been advised by its counsel that under existing law, a
recipient of a Stock Option granted under the Plan will not realize any taxable
income from the grant of such Option and the Company will not be entitled to
any tax deductions for income tax purposes. Upon the exercise of Options
granted under the Plan, the Optionee will realize taxable ordinary income equal
to the excess of the Fair Market Value of the Shares on the date the Option is
exercised over the Option price, and the Company will be entitled to a
corresponding deduction. The Company is entitled to a tax deduction at the
same time in the amount taxable to the individual, provided the Company timely
files the appropriate IRS Form 1099 for the individual.

VOTE REQUIRED AND RECOMMENDATION OF THE BOARD

Stockholder approval of the Plan is not required under the Articles of
Incorporation or By-Laws. The Plan is being submitted for Stockholder approval
in order to meet the requirements of the New York Stock Exchange. The
affirmative vote of the holders of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting is required to approve
the Plan.

THE BOARD OF DIRECTORS RECOMMEND THE VOTE FOR ADOPTION AND APPROVAL OF
THE AMERICAN REALTY TRUST, INC. DIRECTOR STOCK OPTION PLAN.

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SELECTION OF AUDITORS FOR 1998

The Company's auditors for the 1997 fiscal year were BDO Seidman. A
representative of BDO Seidman will attend the annual meeting. The Board of
Directors has selected BDO Seidman as the auditors for the Company for the
1998 fiscal year.

OTHER MATTERS

Management knows of no other matters that may properly be, or that are
likely to be, brought before the meeting. However, if any other matters are
properly brought before the meeting, the persons named in the enclosed proxy or
their substitutes will vote in accordance with their best judgment on such
matters.

FINANCIAL STATEMENTS

The audited consolidated balance sheets of the Company, in comparative
form as of December 31, 1997 and 1996, and the audited consolidated statements
of operations and consolidated statements of cash flows for the years ended
December 31, 1997, 1996 and 1995, are contained in the 1997 Annual Report to
Stockholders. However, such report and the financial statements contained
therein are not to be considered part of this solicitation.

SOLICITATION OF PROXIES

This Proxy Statement is furnished to Stockholders to solicit proxies
on behalf of the Directors of the Company. The cost of soliciting proxies will
be borne by the Company. Directors and officers of the Company may, without
additional compensation, solicit by mail, in person or by telecommunication.
In addition, the Company has retained Shareholder Communications Corporation
("SCC") to assist in the solicitation of proxies. An agreement with SCC
provides that it will distribute materials relating to the solicitation of
proxies, contact Stockholders to confirm receipt of materials and answer
questions relating thereto. SCC is to be paid a base fee of $2,000 plus
out-of-pocket expenses and is to be indemnified against certain liability
incurred as a result of the provision of such services.

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By Order of the Board of Directors

KARL L. BLAHA
President

THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
ALL OF THE NOMINEES AND THAT YOU VOTE FOR PROPOSAL TWO ON THE ENCLOSED PROXY.
REGARDLESS OF HOW YOU WISH TO VOTE YOUR SHARES, YOUR BOARD OF DIRECTORS URGES
YOU TO PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED PROXY.

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AMERICAN REALTY TRUST, INC.
DIRECTOR STOCK OPTION PLAN

ARTICLE I
ESTABLISHMENT, PURPOSE AND DURATION

1.01 ESTABLISHMENT OF THE PLAN. American Realty Trust, Inc., a
Georgia corporation (herein called the "Company"), hereby establishes a stock
option plan to be known as the "American Realty Trust, Inc. Director Stock
Option Plan" (hereinafter referred to as the "Plan"), as set forth in this
document.

1.02 PURPOSE. The purpose of the Plan is to foster and promote the
long term financial success, enhance the value, and advance the interests of
the Company and its shareholders by attracting and retaining outstanding
Directors (as defined below) for the Company and its shareholders by enabling
them to participate in the Company's growth through automatic, nondiscretionary
awards of Options. It is generally recognized that incentive plans aid in
attracting and retaining individuals of exceptional ability to the Company
because of the opportunity to acquire a proprietary interest in the business.

1.03 EFFECTIVE DATE. The Plan shall become effective upon its
approval by an affirmative vote of the holders of a majority of votes cast on
such proposal of Shares present and entitled to vote at a meeting of
Shareholders at which a quorum is present, which vote shall represent over 50%
in interest of all voting securities of the Company entitled to vote therein,
and the date of such approval by such Shareholders shall be the "Effective
Date."

1.04 DURATION OF THE PLAN. The Plan shall commence on the
Effective Date and shall remain in effect, subject to the right of the Board to
terminate the Plan at any time pursuant to Section 8.01 herein, until all
Shares then subject to it shall have been purchased or acquired according to
the Plan's provisions. Notwithstanding the foregoing, the terms of the Plan may
be amended in accordance with the provisions of Section 8.02.

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ARTICLE II
DEFINITIONS

2.01 DEFINED TERMS. For the purposes hereof and as used herein,
the following terms set forth below shall have the meanings set forth below
unless the context clearly indicates to the contrary:

(a) "Board" shall mean the Board of Directors of the
Company.

(b) "Director" shall mean a member of the Board who is a
"non-employee director", as defined in Rule 16b-3.

(d) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.

(e) "Exercise Price" shall mean, with respect to each
Share subject to an Option, the price at which such Share may be
purchased from the Company pursuant to the exercise of such Option.

(f) "Fair Market Value" shall mean (i) the closing sale
price per Share on such date (or, if there are no sales on that date,
the last preceding date on which there was a sale) in the principal
exchange or market in which the Shares are traded, as reported in The
Wall Street Journal or other recognized financial publication or, (ii)
if for any reason no such sales have occurred or, in the opinion of
the Board, do not represent fair market value, then by such other
method as the Board, in its sole discretion in good faith, shall
determine to be appropriate.

(g) "Option" shall mean an option to purchase Shares
granted pursuant to the provisions of the Plan.

(h) "Option Agreement" shall mean the agreement between
the Company and the Optionee under which the Optionee may purchase or
receive or acquire Shares hereunder.

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36
(i) "Optionee" shall mean a Director to whom an Option
has been granted pursuant to the Plan.

(j) "Plan" shall mean the American Realty Trust, Inc.
Director Stock Option Plan, the terms of which are set forth herein.

(k) "Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act.

(l) "Securities Act" shall mean the Securities Act of
1933, as amended.

(m) "Shares" shall mean the authorized shares of Common
Stock, $.01 par value, of the Company or, in the event that the
outstanding Shares are hereafter changed into or exchanged for other
shares of a different class of securities of the Company or some other
entity, such other shares or class of securities.

2.02 OTHER DEFINITIONAL PROVISIONS. All terms defined in this Plan
shall have the meanings set forth in Section 2.01 above when used in any Option
Agreement or other document made or delivered pursuant to this Plan, unless the
context therein shall otherwise require or unless re-defined therein. Defined
terms used herein in the singular shall import the plural and vice versa. The
words "hereof," "herein," "hereunder" and similar terms when used in this Plan
shall refer to this Plan as a whole and not to any particular provision of the
Plan.

ARTICLE III
ADMINISTRATION

3.01 DUTIES AND POWERS OF THE BOARD. The Plan shall be
administered by the Board. Subject to express provisions of the Plan, the
Board shall have plenary authority, in its discretion, to interpret all matters
involving the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine and to amend, subject to the concurrence of the
holder of any Option, if required, the terms and provisions of the respective
Option Agreement or any other agreement and to make all other

3
37
determinations necessary or advisable for the administration of the Plan. The
Board's determinations on the matters referred to herein shall be conclusive
for all purposes.

3.02 EXPENSES OF PLAN. The expenses of administering the Plan
shall be borne by the Company.

3.03 RELIANCE ON REPORTS. Each member of the Board shall be fully
justified in relying or acting in good faith upon any report made by the
independent public accountants of the Company and upon any other information
furnished in connection with the Plan by any person or persons other than
himself. In no event shall any person who is or shall have been a member of
the Board be liable for any determination made or other action taken or any
omission to act in reliance upon any such report or information or for any
action, including the furnishing of information, taken or failure to act, if in
good faith.

3.04 INDEMNIFICATION. Each person who is or shall have been a
member of the Board shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him in connection with or resulting from any claim,
action, suit or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof, with
the Company's approval, or paid by him in satisfaction of judgment in any such
action, suit, or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which such person may be entitled under the Company's Articles of
Incorporation, as amended, or the By-Laws of the Company, as amended, as a
matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.

ARTICLE IV
SHARES SUBJECT TO THE PLAN

4.01 LIMITATIONS. Subject to adjustment pursuant to the provisions
of Section 4.02, a total of 40,000 Shares may be issued

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under the Plan. Such Shares may be authorized but unissued Shares, treasury
Shares, or any combination thereof as determined from time to time by the
Board. Shares may be issued pursuant to the exercise of any Option. In the
event any Option shall expire or terminate for any reason without having been
exercised in full, then, subject to the provisions of the Plan, the Shares
subject to such Option shall again become available for the purposes of the
Plan.

4.02 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Not with-
standing any other provision of the Plan, any Option Agreement or other
agreement covering an Option may contain such provisions as the Board shall
determine to be appropriate for the adjustment of the number and class of
Shares subject thereto and of the purchase or acquisition prices thereof in the
event of changes in the outstanding Shares by reason of stock dividends,
recapitalizations, mergers, consolidations, split-ups, combinations or
exchanges of Shares and the like; and, in the event of any such change in the
Shares, the aggregate number and class of Shares available under the Plan shall
be adjusted in such manner as the Board shall in its sole discretion determine
to be equitable and consistent for the purpose of the Plan and the applicable
provisions of law and such determination shall be conclusive for all purposes
of the Plan and of each Option Agreement or other agreement, whether
theretofore or thereafter executed. In addition, the Board's determination
with respect to any adjustment may provide for the elimination of fractional
Share interests, if applicable, and the payment for same in cash.

ARTICLE V
ELIGIBILITY

Eligibility in this Plan shall be limited to Directors.

ARTICLE VI
GRANT OF OPTIONS

6.01 GRANT AND AGREEMENT. Each Option granted pursuant to the
terms of the Plan shall be evidenced by a written Option Agreement dated as of
the date of grant and executed on behalf of the Company and the Optionee, which
agreement shall set forth such terms and conditions as may be determined by the
Board consistent with the Plan.

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6.02 ISSUANCE OF OPTION. Effective on the Effective Date, each
Director then in office will automatically be awarded an Option under the Plan
to purchase 1,000 Shares (subject to adjustment pursuant to Section 4.02).
After the Effective Date, each Director shall be granted an Option on the first
day of each year commencing with January 1, 1999 for 1,000 Shares (subject to
adjustment pursuant to Section 4.02) if such Director is a Director of the
Company on such date. A former Director who is not a Director at such date
shall not receive a grant of any subsequent Option. In the event the number of
Shares available for grants is insufficient to make all grants provided for in
this Section 6.02, then the Directors entitled to a grant on such date shall
share ratably in the number of Shares available and no further grants shall be
made under this Plan. The term and exercise of each such Option shall be as
set forth in Section 6.03 below. Nothing contained in this Plan or any
agreement executed pursuant to this Plan shall be deemed to limit or confer
upon any Director any right to serve as a Director for any period of time or to
continue at any rate of compensation.

6.03 TERM AND EXERCISE. The term of each Option granted under the
Plan shall be for a fixed expiration date of the first to occur of (i) the
tenth anniversary from the date such Option is granted or (ii) the first
anniversary of the date the Director ceases to be a member of the Board. The
Exercise Price of Shares issued pursuant to each Option shall be 100% of the
Fair Market Value of the Shares on the date such Option is granted. The Shares
subject to each Option may be exercised in full or in installments of equal or
unequal amount at such times as shall be determined by the Optionee after the
date of grant; provided, however, that no Option shall be exercised at any time
for fewer than 100 Shares (or the total remaining shares covered by the Option
if fewer than 100 Shares) during the term of the Option. The specified number
of Shares will be issued upon receipt by the Company of (i) notice from the
Optionee of exercise of an Option, and (ii) payment to the Company, of the
Exercise Price for the number of Shares with respect to which the Option is
exercised. Each such notice and payment shall be delivered or mailed by first
class postage prepaid mail, addressed to the Treasurer of the Company at such
place as the Company may designate from time to time. Certificates shall be
issued by the Company for those Shares acquired pursuant to the exercise of an
Option. No Optionee shall have any of the rights of a shareholder with respect
to any Shares subject to any Option until such Shares shall be issued to him
upon the exercise of the Option.

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6.04 TRANSFERABILITY OF OPTIONS. Except as provided below, no
Option granted under the Plan shall be transferable other than by will or the
laws of descent and distribution, and an Option may be exercised, during the
lifetime of the Optionee, only by the Optionee or, if the Optionee is legally
incapacitated, by his or her respective guardian or legal representative,
regardless of any community property interests therein of any Optionee's spouse
or such spouse's successors in interest; provided, however that an Option may
be transferred to an immediate family member subject to such terms and
conditions as the Board may approve from time to time.

6.05 PURCHASE FOR INVESTMENT. Each Optionee receiving an Option
pursuant to the Plan must represent, and agree to give such further
representation as may be reasonably required by the Company upon the exercise
of such Option or any part thereof, that any Shares purchased pursuant to such
Option will be, or are, acquired for his own account for investment and not
with a view to, or for offer or sale in connection with, the distribution
thereof, unless in the opinion of counsel satisfactory to the Company that same
is not necessary at such time.

6.06 EFFECT OF DEATH OR OTHER TERMINATION FROM THE BOARD. Subject
to the other provisions of the Plan, in the event that an Optionee ceases to be
a member of the Board such Option may be exercised by the Optionee, such
Optionee's legal representatives or by the person or persons to whom such
Option has been transferred by will or the applicable laws of descent and
distribution or any permitted transferee, within the period provided by Section
6.03.

6.07 PAYMENT FOR SHARES. The Exercise Price for the Shares shall
be paid in full when the Option is exercised. The Exercise Price may be paid
in whole or in part in (i) cash, (ii) whole Shares owned by the individual for
six months or longer, valued at their Fair Market Value on the date of
exercise, (iii) by a combination of such methods of payment or (iv) such other
consideration as shall constitute lawful consideration for the issuance of
Shares and be approved by the Board (including without limitation, assurance
satisfactory to the Board from a broker

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registered under the Exchange Act, of the delivery of the proceeds of an
imminent sale of the Shares to be issued pursuant to the exercise of such
Option, such sale to be made at the direction of the individual).

ARTICLE VII
COMPLIANCE WITH LAW AND ISSUANCE
OF CERTIFICATES OR PAYMENT OF FUNDS

7.01 COMPLIANCE WITH THE SECURITIES ACT. Each Option granted under
the Plan shall contain such provisions or undertakings by the Optionee
pertaining to the re-sale or distribution of any Shares acquired pursuant to
such Option as the Company shall deem appropriate and necessary to comply with
the Securities Act, and the rules, regulations and administrative
interpretations thereunder; provided that the Company may waive any such
provisions or undertakings if the Company shall determine that same are no
longer required under said Securities Act, rules, regulations or
interpretations, or are otherwise unnecessary.

7.02 GOVERNMENTAL APPROVAL. Each Option shall be subject to the
requirement that if at any time the Board shall determine, in its sole
discretion, that the listing, registration or qualification of the Shares
covered thereby upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of or in connection with the granting of such Option
or the issuance or acquisition of Shares thereunder, no such Option shall be
effective unless and until such listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Board.

7.03 ISSUANCE OF CERTIFICATES AND PAYMENT OF FUNDS. The Company
shall not be required to issue or deliver any certificate for Shares to be
purchased or issued, or any funds required to be paid by the Company upon the
exercise of any Option granted under the Plan or any portion thereof, pursuant
to any Option Agreement or any other agreement relating to the Plan prior to
the fulfillment of all of the following conditions:

(a) compliance with any requirements under Section 7.01
above;

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(b) compliance with any applicable requirements under
Section 7.02 above;

(c) the lapse of such reasonable period of time following
the exercise of the Option as the Board, from time to time, may
establish for reasons of administrative convenience; and

(d) if pursuant to any applicable statute or regulation,
as then in effect, if such issuance or delivery would be in violation
of any statute, law, rule or regulation, whether federal or state.

7.04 SHARE WITHHOLDING. Whenever the Company is required to
withhold taxes upon the exercise of an Option, the Company shall have the right
to withhold a number of Shares sufficient to satisfy such tax requirements.

ARTICLE VIII
TERMINATION, AMENDMENT AND
MODIFICATION OF THE PLAN

8.01 TERMINATION OF PLAN. The Plan may be terminated at any time
by the Board except with respect to Options then outstanding under the Plan.
No termination of the Plan may, without the consent of the person to whom any
Option shall theretofore been granted, adversely affect the rights of such
person under such Option.

8.02 AMENDMENT. The Board may, at any time and from time to time,
alter, amend, suspend or discontinue the Plan and the rules for its
administration as the Board may deem advisable in order that any Options
thereunder shall conform to or otherwise reflect any change in applicable laws
or regulations or to permit the Company or the Directors to enjoy the benefits
of any change in applicable laws or regulations, or in any other respect the
Board may deem to be in the best interests of the Company; provided, however,
that the Board may not, without further approval by a majority of votes cast on
such proposal provided the total votes cast thereon represents over 50% in
interest of the holders of the then outstanding voting securities of the
Company entitled to vote thereon,

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43
(a) increase (other than by adjustments provided for by
Section 4.02) the maximum number of Shares which may be issued
pursuant to all Options granted under the Plan,

(b) materially modify the requirements as to eligibility
for participation in the Plan, or

and, provided further, that no such amendment or modification of the Plan may,
without the consent of the person to whom any Option shall theretofore have
been granted, adversely affect the rights of such person under such Option.

ARTICLE IX
MISCELLANEOUS

9.01 PLAN BINDING ON SUCCESSORS. The Plan shall be binding upon
the successors and assigns of the Company.

9.02 REQUIREMENTS OF LAW. The granting of Options and the issuance
of Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

9.03 GOVERNING LAW. The Plan, and all agreements hereunder, shall
be construed in accordance with and governed by the laws of the State of Texas.

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PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 11, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AMERICAN REALTY TRUST, INC.

The undersigned hereby appoints THOMAS A. HOLLAND and ROBERT A. WALDMAN,
and each of them, Proxies, with full power of substitution in each of them, in
the name, place and stead of the undersigned, to be at the Annual Meeting of
Stockholders of AMERICAN REALTY TRUST, INC., to be held on Monday, January 11,
1999, at 2:00 p.m. (Dallas time), or at any adjournments thereof, according to
the number of votes that the undersigned would be entitled to vote if
personally present, upon the following matters:

1. ELECTION OF DIRECTORS:

FOR the nominee(s) WITHHOLD AUTHORITY TO
(except as marked to the vote for the nominee(s)
contrary below) [ ] listed below [ ]

Karl L. Blaha Roy E. Bode Al Gonzalez
Cliff Harris

Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space below. When a proxy card is
property executed and returned, the Shares represented thereby will be
voted in favor of the election for each of the nominees, unless
authority to vote for any such nominee is specifically withheld.
There will be no cumulative voting for the election of Directors. If
any nominee is unable to serve or will not serve (an event which is
not anticipated), then the person acting pursuant to the authority
granted under the proxy will cast votes for the remaining nominees
and, unless the Board of Directors takes action to reduce the number
of Directors, for such other person(s) as he or she may select in
place of such nominees.

- - --------------------------------------------------------------------------------

2. PROPOSAL TO APPROVE THE DIRECTOR STOCK OPTION PLAN:

FOR [ ] AGAINST [ ] ABSTAIN [ ]

3. OTHER BUSINESS:

I AUTHORIZE the aforementioned proxies in their discretion:

FOR [ ] AGAINST [ ] ABSTAIN [ ]

to vote upon such other business as may properly come before the
Annual Meeting and any adjournments thereof.

THE BOARD OF DIRECTORS OF AMERICAN REALTY TRUST, INC. RECOMMENDS A VOTE FOR
EACH OF THE NOMINEES AND FOR PROPOSAL TWO.

YOUR PROXY IS IMPORTANT. PLEASE INDICATE YOUR SUPPORT FOR THE BOARD OF
DIRECTORS BY MARKING THE BOXES FOR ELECTION OF THE DIRECTORS AND FOR PROPOSAL
TWO. PLEASE SIGN, DATE AND MAIL THIS CARD TODAY IN THE ENCLOSED ENVELOPE. IF
NOT OTHERWISE MARKED ABOVE, YOUR PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES AND FOR PROPOSAL TWO. THIS PROXY REVOKES ALL PREVIOUS PROXIES.

(continued and to be signed and dated on the other side)

PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY

[reverse]

(continued from other side)

Dated:_______________, 1999

x
---------------------------
Signature

x
---------------------------
Signature (if held jointly)

x
---------------------------
Title

Please sign exactly as name appears herein. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
When signing for corporation, please sign full corporate name by an
authorized officer. When signing for a partnership, please sign
partnership name by an authorized person. If shares are held in more
than one capacity, this proxy shall be deemed valid for all shares
held in all capacities.