American Realty Investors, Inc. Reports 2003 Results.

Business Editors/Real Estate Writers

DALLAS--(BUSINESS WIRE)--April 19, 2004

American Realty Investors, Inc. (NYSE:ARL), a Dallas-based real estate investment company, announced today that the company reported net income of $8.3 million, $0.77 per share, on revenue of $223.6 million for the year ending Dec. 31, 2003, compared to a net loss of $10.9 million, or $(0.96) per share, on revenue of $154.4 million in 2002. ARL reported a fourth quarter net loss of $2.0 million, or $(0.18) per share, on revenue of $80.8 million, compared to fourth quarter 2002 net income of $7.6 million, or $0.66 per share, on revenue of $42.1 million.

Income, sales and related expenses and costs for the fourth quarter and twelve months of 2003 resulted in increased income from operations of $22.8 million and $101.3 million, compared to $15.3 million and $39.7 million in the 2002 comparable periods, and included:

-- Income from rents increased to $50.5 million and $166.9

million in 2003, from $17.4 million and $73.3 million in the

2002 comparable periods. The increase is primarily

attributable to the consolidation of Transcontinental Realty

Investors, Inc. ("TCI"). Without the effect of the

consolidation, rents increased to $18.6 million and $76.6

million in 2003, primarily due to increased hotel occupancy 

and the acquisition of two apartments and the construction of

one apartment in 2002.

-- Property operations expenses increased to $37.2 million and

$116.5 million in 2003, from $14.4 million and $57.1 million

in the 2002 comparable periods. The increase is also

attributable to the consolidation of TCI. Without the effect

of the consolidation, property operations expense increased to

$16.4 million and $59.0 million in 2003, primarily due to

increased personnel costs for hotels and the acquisition of

two apartments and the construction of one apartment in 2002.

-- Pizza parlor sales increased to $8.8 million and $33.1 million

in 2003, from $8.1 million and $32.0 million in the 2002

comparable periods. Cost of sales increased to $6.7 million

and $26.1 million in 2003, from $6.5 million and $25.3 million

in the 2002 comparable periods. Gross margins increased to

$2.1 million and $7.0 million from $1.6 million and $6.7

million in the 2002 comparable periods. The increases were

primarily attributable to increases of 4.6% in same-store

sales in 2003.

-- Land sales, cost of sales and gain on land sales was $27.6

million, $16.7 million and $7.4 million in the fourth quarter

of 2003, compared to $71.8 million, $36.8 million and $10.7

million in the fourth quarter of 2002. Land sales, cost of

sales and gain on land sales were $67.3 million, $39.9 million

and $43.8 million in the twelve months ended Dec. 31, 2003

compared to $127.7 million, $75.7 million and $16.7 million in

the 2002 comparable period. The gain on land sales for the

twelve months ended Dec. 31, 2003 included recognition of

$19.92 million of previously deferred gains, compared to

$830,000 of previously deferred gains recognized in the twelve

months ended Dec. 31, 2002.

Other income (loss) improved to income of $16.7 million and $20.2 million in 2003, compared to losses of $(478,000) and $(12.6) million in 2002. Other income (loss) included:

-- Equity in the loss of investees improved to $(162,000) and

$(4.4) million in 2003, compared to $(6.9) million and $(20.9)

million in 2002, due to the consolidation of TCI by ARI. Loss

on sale of investments in equity investees was $286,000 in the

twelve months ended Dec. 31, 2002.

-- Interest income increased to $2.1 million and $9.2 million in

2003, compared to $1.2 million and $3.1 million in 2002. The

increase was primarily attributable to interest earned by

Realty Advisors Korea during ARI's ownership, and to notes

receivable from property sales in late 2002 and early 2003.

Other expenses (excluding property operations expenses and costs of sales for pizza and land) increased in the fourth quarter and twelve months of 2003 to $54.8 million and $154.1 million, compared to $22.2 million and $84.8 million in 2002, and included:

-- Interest expense increased to $21.9 million and $71.0 million

in 2003, compared to $12.9 million and $52.1 million in 2002,

due to the consolidation of TCI by ARI. Without the effect of

the consolidation, interest expense decreased to $11.7 million

and $41.6 million in 2003, due to reduced balances payable on

stock loans and land mortgages.

-- Depreciation and amortization expense increased to $9.2

million and $25.8 million in 2003, compared to $1.5 million

and $7.8 million in 2002, due to the consolidation of TCI by

ARI. Without the effect of the consolidation, depreciation and

amortization expense increase to $3.9 million and $9.8 million

in 2003, primarily due to improvements at one hotel.

-- General and administrative expenses increased to $6.2 million

and $22.2 million in 2003, compared to $2.7 million and $12.5

million in 2002, due to the consolidation of TCI by ARI. The

three and twelve months of 2003 $3.1 million of one-time 

reimbursements to ARI's advisor for legal fees.

-- Advisory, net income and incentive fees decreased to a total

of $202,000 in the fourth quarter and increased to a total of

$9.3 million in the twelve months ended Dec. 31, 2003,

compared to $1.1 million and $5.9 million in 2002, due to the

consolidation of TCI by ARI. Net income fees and incentive

fees were $(1.77) million in the three months ended Dec. 31,

2003. There were no net income fees or incentive fees for the

twelve months ended Dec. 31, 2003.

-- Writedown of assets held for sale of $17.5 million and $19.9

million in 2003, compared to $3.7 million and $4.2 million in

2002. In 2003, the carrying values of an office building and a

hotel sold in the third quarter of 2003, an apartment and land

sold in the first quarter of 2004, and an office building

returned to the lender in the first quarter of 2004 were

reduced to their net realizable value. In 2002, the carrying

values of a shopping center sold in the fourth quarter of 2002

and land sold in the first quarter of 2003 were reduced to

their net realizable value.

Net income from discontinued operations (non-land properties sold) in 2003 decreased to $13.8 million and $43.3 million, compared to $15.6 million and $49.3 million in 2002, representing 23 properties and leasehold interests in oil and gas properties sold in 2002, 32 properties sold in 2003, and four properties sold in 2004. Included in the 2003 net income from discontinued operations were:

-- Gains on real estate sales of $14.8 million and $48.8 million

in 2003, compared to $8.6 million and $31.7 million in 2002.

-- Equity in gains on real estate sales by investees of $880,000

and $715,000 in 2003, compared to $9.2 million and $24.1

million in 2002.

See attached schedule.

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.

                   AMERICAN REALTY INVESTORS, INC.
                         FINANCIAL HIGHLIGHTS



                        For the Three Months    For the Twelve Months
                         Ended December 31,      Ended December 31,
                       ----------------------- -----------------------
                          2003        2002        2003        2002
                       ----------- ----------- ----------- -----------
                          (dollars in thousands, except per share)

Income from rents         $50,489     $17,365    $166,908     $73,297
Operations expense         37,196      14,447     116,454      57,110
                       ----------- ----------- ----------- -----------
  Operating income         13,293       2,918      50,454      16,187

Land sales                 27,629      71,770      67,283     127,750
Costs of sales             16,733      36,802      39,883      75,718
Deferral of gains on
 current period sales       3,493      24,222       3,493      36,135
Recognition of
 previously deferred
 gains                          0           0      19,924         830
                       ----------- ----------- ----------- -----------
  Gain on land sales        7,403      10,746      43,831      16,727

Pizza sales                 8,790       8,057      33,057      32,036
Cost of sales               6,694       6,465      26,051      25,286
                       ----------- ----------- ----------- -----------
  Gross margin              2,096       1,592       7,006       6,750

Income from operations     22,792      15,256     101,291      39,664

Interest and other
 income                     4,892       6,413      12,630       8,304
Equity in loss of
 investees                   (162)     (6,891)     (4,441)    (20,914)
Gain on extinguishment
 of debt                    7,210           0       7,210           0
Gain on condemnation
 award                      4,800           0       4,800           0
Other expenses             54,815      22,164     154,108      84,795
                       ----------- ----------- ----------- -----------

Net loss from
 continuing operations    (15,283)     (7,386)    (32,618)    (57,741)

Loss from discontinued
 operations                (1,830)     (2,140)     (6,231)     (6,498)
Gain on sale of real
 estate                    14,765       8,566      48,806      31,706
Equity in investees'
 gain on sale of real
 estate                       880       9,173         715      24,069
                       ----------- ----------- ----------- -----------
Net income from
 discontinued
 operations                13,815      15,599      43,290      49,277

Net income (loss)          (1,468)      8,213      10,672      (8,464)
Preferred dividend
 requirement                 (543)       (600)     (2,351)     (2,401)
                       ----------- ----------- ----------- -----------

Net income (loss)
 applicable to Common
 shares                   $(2,011)     $7,613      $8,321    $(10,865)
                       =========== =========== =========== ===========

Basic and Diluted
 Earnings Per Share
  Net loss from
   continuing
   operations              $(1.46)     $(0.71)     $(3.24)     $(5.29)
  Discontinued
   operations                1.28        1.37        4.01        4.33
                       ----------- ----------- ----------- -----------
Net income (loss)
 applicable to Common
 shares                    $(0.18)      $0.66       $0.77      $(0.96)
                       =========== =========== =========== ===========

Weighted average
 Common shares used to
 compute earnings per
 share                 10,642,505  11,375,127  10,789,352  11,375,127
                       =========== =========== =========== ===========