----

----

----

----

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

----

----

|                                                          |                                |
|---------------------------------------------------------------|-------------------------------------|
| Nevada                                                        | 75-2847135                          |
| (State or Other Jurisdiction ofIncorporation or Organization) | (I.R.S. EmployerIdentification No.) |

----

|                                                                                              |                                |   |   |
|---------------------------------------------------------------------------------------------------|-------------------------------------|--------|--------|
| Large accelerated filer  ̈                                                          | Accelerated filer              |  ̈ |
|                                                                                              |                                |   |
| Non-accelerated filer    ̈  (Do not check if a smaller reporting company) | Smaller reporting company | x      |

|                         |                         |
|------------------------------|------------------------------|
| Common Stock, $.01 par value | 11,525,389                   |
| (Class)                      | (Outstanding at May 5, 2012) |

----

|                               |                                                                                                                  |                                                                                         |
|------------------------------------|-----------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                               |                                                                                                                  |     PAGE                                   |
| PART I. FINANCIAL INFORMATION |                                                                                                                  |
|                               |                                                                                                                  |                                                                                         |
| Item 1.                       | Financial Statements                                                                                                  |                                                                                         |
|                               |                                                                                                                  |                                                                                         |
|                               | Consolidated Balance Sheets at March 31, 2012 (unaudited) and December 31, 2011                                       |                3  |
|                               |                                                                                                                  |                                                                                         |
|                               | Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011 (unaudited)                  |                4  |
|                               |                                                                                                                  |                                                                                         |
|                               | Consolidated Statement of Shareholders’ Equity for the three months ended March 31, 2012 (unaudited)            |                5  |
|                               |                                                                                                                  |                                                                                         |
|                               | Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2012 and 2011 (unaudited) |                6  |
|                               |                                                                                                                  |                                                                                         |
|                               | Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011 (unaudited)                  |                7  |
|                               |                                                                                                                  |                                                                                         |
|                               | Notes to Consolidated Financial Statements                                                                            |                8  |
|                               |                                                                                                                  |                                                                                         |
| Item 2.                       | Management’s Discussion and Analysis of Financial Condition and Results of Operations                           |                23 |
|                               |                                                                                                                  |                                                                                         |
| Item 3.                       | Quantitative and Qualitative Disclosures About Market Risk                                                            |                33 |
|                               |                                                                                                                  |                                                                                         |
| Item 4.                       | Controls and Procedures                                                                                               |                33 |
|                               |                                                                                                                  |
| PART II. OTHER INFORMATION    |                                                                                                                  |
|                               |                                                                                                                  |                                                                                         |
| Item 2.                       | Unregistered Sales of Equity Securities and Use of Proceeds                                                           |                34 |
|                               |                                                                                                                  |                                                                                         |
| Item 6.                       | Exhibits                                                                                                              |                34 |
|                               |                                                                                                                  |
| SIGNATURES                         |                35                          |

----

| AMERICAN REALTY INVESTORS, INC.                                                                                                                                                                                                           |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED BALANCE SHEETS                                                                                                                                                                                                               |   |
| (unaudited)                                                                                                                                                                                                                               |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |
|                                                                                                                                                                                                                                      |   | March 31, |   |   | December 31, |   |
|                                                                                                                                                                                                                                      |   | 2012 |   |   | 2011 |   |
|                                                                                                                                                                                                                                      |   | (dollars in thousands, except share and par value amounts) |   |
| Assets                                                                                                                                                                                                                                    |   |   |   |   |   |   |
| Real estate, at cost                                                                                                                                                                                                                      |   | $ | 1,081,349 |   |   | $ | 1,120,122 |   |
| Real estate held for sale at cost, net of depreciation ($3,168  and $1,752,for 2012 and 2011)                                                                                                                                   |   |   | 28,663 |   |   |   | 15,015 |   |
| Real estate subject to sales contracts at cost, net of depreciation ($10,000 and $9,790 in 2012 and 2011)                                                                                                                                 |   |   | 45,956 |   |   |   | 49,982 |   |
| Less accumulated depreciation                                                                                                                                                                                                             |   |   | (160,628 | ) |   |   | (158,489 | ) |
| Total real estate                                                                                                                                                                                                                         |   |   | 995,340 |   |   |   | 1,026,630 |   |
| Notes and interest receivable                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| Performing (including $100,713 and $104,969 in 2012 and 2011 from affiliates and related parties)                                                                                                                                         |   |   | 114,810 |   |   |   | 110,136 |   |
| Non-performing  (including $3,279 and $0 in 2012 and 2011 from affiliates and related parties)                                                                                                                                  |   |   | 9,160 |   |   |   | 4,787 |   |
|    Less allowance for estimated losses (including $18,962 and $8,962 in 2012 and 2011 from affiliates and related parties)                                                                                                 |   |   | (23,383 | ) |   |   | (13,383 | ) |
| Total notes and interest receivable                                                                                                                                                                                                       |   |   | 100,587 |   |   |   | 101,540 |   |
| Cash and cash equivalents                                                                                                                                                                                                                 |   |   | 8,161 |   |   |   | 20,312 |   |
| Investments in unconsolidated subsidiaries and investees                                                                                                                                                                                  |   |   | 7,848 |   |   |   | 10,746 |   |
| Other assets (including $22 and $11 in 2012 and 2011 from affiliates and related parties)                                                                                                                                                 |   |   | 69,718 |   |   |   | 76,243 |   |
| Total assets                                                                                                                                                                                                                              |   | $ | 1,181,654 |   |   | $ | 1,235,471 |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Liabilities and Shareholders’ Equity                                                                                                                                                                                                |   |   |   |   |   |   |   |   |
| Liabilities:                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |
| Notes and interest payable                                                                                                                                                                                                                |   | $ | 833,969 |   |   | $ | 855,619 |   |
| Notes related to assets held-for-sale                                                                                                                                                                                                     |   |   | 20,089 |   |   |   | 13,830 |   |
| Notes related to subject to sales contracts                                                                                                                                                                                               |   |   | 40,615 |   |   |   | 44,516 |   |
| Stock-secured notes payable and margin debt                                                                                                                                                                                               |   |   | 26,486 |   |   |   | 26,898 |   |
| Affiliate payables                                                                                                                                                                                                                        |   |   | 638 |   |   |   | 10,294 |   |
| Deferred gain (including $77,227 and $71,964 in 2012 and 2011 from sales to related parties)                                                                                                                                              |   |   | 79,072 |   |   |   | 78,750 |   |
| Accounts payable and other liabilities (including $1,861 and $1,822 in 2012 and 2011 to affiliates and related parties)                                                                                                                   |   |   | 94,663 |   |   |   | 110,307 |   |
|                                                                                                                                                                                                                                      |   |   | 1,095,532 |   |   |   | 1,140,214 |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Shareholders’ equity:                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Preferred stock, $2.00 par value, authorized 15,000,000 shares, issued and outstanding Series A, 3,353,954 shares in 2012 and 2011 (liquidation preference $10 per share), including 900,000 shares in 2012 and 2011 held by subsidiaries |   |   | 4,908 |   |   |   | 4,908 |   |
| Common stock, $.01 par value, authorized 100,000,000 shares; issued 11,941,174 shares and outstanding 11,525,389 shares in 2012 and in 2011                                                                                               |   |   | 115 |   |   |   | 115 |   |
| Treasury stock at cost; 415,785 shares in 2012 and 2011 and 234,314 and 236,587 shares held by TCI  as of 2012 and 2011.                                                                                                             |   |   | (6,395 | ) |   |   | (6,395 | ) |
| Paid-in capital                                                                                                                                                                                                                           |   |   | 106,127 |   |   |   | 105,388 |   |
| Retained earnings                                                                                                                                                                                                                         |   |   | (54,361 | ) |   |   | (47,486 | ) |
| Accumulated other comprehensive income                                                                                                                                                                                                    |   |   | (786 | ) |   |   | (786 | ) |
| Total American Realty Investors, Inc. shareholders' equity                                                                                                                                                                                |   |   | 49,608 |   |   |   | 55,744 |   |
| Non-controlling interest                                                                                                                                                                                                                  |   |   | 36,514 |   |   |   | 39,513 |   |
| Total equity                                                                                                                                                                                                                              |   |   | 86,122 |   |   |   | 95,257 |   |
| Total liabilities and equity                                                                                                                                                                                                              |   | $ | 1,181,654 |   |   | $ | 1,235,471 |   |
|                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements.                                                                                                                                                   |   |

----

| AMERICAN REALTY INVESTORS, INC.                                                                                                                      |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                                                |   |
| (unaudited)                                                                                                                                          |   |
|                                                                                                                                                 |   | For the Three Months Ended |   |
|                                                                                                                                                 |   | March 31, |   |
|                                                                                                                                                 |   | 2012 |   |   | 2011 |   |
|                                                                                                                                                 |   | (dollars in thousands, except share and per share amounts) |   |
| Revenues:                                                                                                                                            |   |   |   |   |   |   |
| Rental and other property revenues (including $167 and $0 for the three months ended 2012 and 2011 respectively from affiliates and related parties) |   | $ | 30,318 |   |   | $ | 27,918 |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |
| Expenses:                                                                                                                                            |   |   |   |   |   |   |   |   |
| Property operating expenses(including $307 and $297 for the three months ended 2012 and 2011 respectively from affiliates and related parties)       |   |   | 16,208 |   |   |   | 15,919 |   |
| Depreciation and amortization                                                                                                                        |   |   | 5,503 |   |   |   | 5,282 |   |
| General and administrative(including $922 and $1,187 for the three months ended 2012 and 2011 respectively from affiliates and related parties)      |   |   | 3,181 |   |   |   | 3,242 |   |
| Provision on impairment of notes receivable and real estate assets                                                                                   |   |   | - |   |   |   | 5,178 |   |
| Advisory fee to affiliate                                                                                                                            |   |   | 2,658 |   |   |   | 3,522 |   |
|      Total operating expenses                                                                                               |   |   | 27,550 |   |   |   | 33,143 |   |
|      Operating income                                                                                                       |   |   | 2,768 |   |   |   | (5,225 | ) |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |
| Other income (expense):                                                                                                                              |   |   |   |   |   |   |   |   |
| Interest income(including $3,431 and $466 for the three months ended 2012 and 2011 respectively from affiliates and related parties)                 |   |   | 3,340 |   |   |   | 668 |   |
| Other income (including $1,500 and $0 for the three months ended 2012 and 2011 respectively from affiliates and related parties)                     |   |   | 1,628 |   |   |   | 1,214 |   |
| Mortgage and loan interest (including $922 and $306 for the three months ended 2012 and 2011 respectively from affiliates and related parties)       |   |   | (17,735 | ) |   |   | (14,666 | ) |
| Loss on sale of investments                                                                                                                          |   |   | (362 | ) |   |   | - |   |
| Earnings from unconsolidated subsidiaries and investees                                                                                              |   |   | 117 |   |   |   | (95 | ) |
|         Total other expenses                                                                                 |   |   | (13,012 | ) |   |   | (12,879 | ) |
| Loss before gain on land sales, non-controlling interest, and taxes                                                                                  |   |   | (10,244 | ) |   |   | (18,104 | ) |
| Gain (loss) on land sales                                                                                                                            |   |   | (1,021 | ) |   |   | 5,344 |   |
| Loss from continuing operations before tax                                                                                                           |   |   | (11,265 | ) |   |   | (12,760 | ) |
|    Income tax benefit                                                                                                                 |   |   | 1,125 |   |   |   | 485 |   |
| Net loss from continuing operations                                                                                                                  |   |   | (10,140 | ) |   |   | (12,275 | ) |
| Discontinued operations:                                                                                                                             |   |   |   |   |   |   |   |   |
|    Loss from discontinued operations                                                                                                  |   |   | (375 | ) |   |   | (2,750 | ) |
|    Gain on sale of real estate from discontinued operations                                                                           |   |   | 3,588 |   |   |   | 4,137 |   |
|    Income tax expense from discontinued operations                                                                                    |   |   | (1,125 | ) |   |   | (485 | ) |
| Net income from discontinued operations                                                                                                              |   |   | 2,088 |   |   |   | 902 |   |
| Net loss                                                                                                                                             |   |   | (8,052 | ) |   |   | (11,373 | ) |
| Net loss attributable to non-controlling interest                                                                                                    |   |   | 1,177 |   |   |   | 2,170 |   |
| Net loss attributable to American Realty Investors, Inc.                                                                                             |   |   | (6,875 | ) |   |   | (9,203 | ) |
| Preferred dividend requirement                                                                                                                       |   |   | (613 | ) |   |   | (617 | ) |
| Net loss applicable to common shares                                                                                                                 |   | $ | (7,488 | ) |   | $ | (9,820 | ) |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |
| Earnings per share - basic                                                                                                                           |   |   |   |   |   |   |   |   |
|    Loss from continuing operations                                                                                                    |   | $ | (0.83 | ) |   | $ | (0.93 | ) |
|    Income from discontinued operations                                                                                                |   |   | 0.18 |   |   |   | 0.07 |   |
|    Net loss applicable to common shares                                                                                               |   | $ | (0.65 | ) |   | $ | (0.86 | ) |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |
| Earnings per share - diluted                                                                                                                         |   |   |   |   |   |   |   |   |
|    Loss from continuing operations                                                                                                    |   | $ | (0.83 | ) |   | $ | (0.93 | ) |
|    Income from discontinued operations                                                                                                |   |   | 0.18 |   |   |   | 0.07 |   |
|    Net loss applicable to common shares                                                                                               |   | $ | (0.65 | ) |   | $ | (0.86 | ) |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |
| Weighted average common share used in computing earnings per share                                                                                   |   |   | 11,525,389 |   |   |   | 11,493,115 |   |
| Weighted average common share used in computing diluted earnings per share                                                                           |   |   | 11,525,389 |   |   |   | 11,493,115 |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |   |
| Amounts attributable to American Realty Investors, Inc.                                                                                              |   |   |   |   |   |   |   |   |
| Loss from continuing operations                                                                                                                      |   | $ | (8,963 | ) |   | $ | (10,105 | ) |
| Income from discontinued operations                                                                                                                  |   |   | 2,088 |   |   |   | 902 |   |
| Net loss                                                                                                                                             |   | $ | (6,875 | ) |   | $ | (9,203 | ) |

----

| AMERICAN REALTY INVESTORS, INC.                                                         |   |
|-----------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY                                    |   |
| For the Three Months Ended March 31, 2012                                               |   |
| (unaudited)                                                                             |   |
| (dollars in thousands)                                                                  |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                                                                                    |   | Total |   |   | Comprehensive |   |   | Series APreferred |   |   | Common Stock |   |   | Treasury |   |   | Paid-in |   |   | Retained |   |   | OtherComprehensive |   |   | Non-controlling |   |
|                                                                                    |   | Capital |   |   | Loss |   |   | Stock |   |   | Shares |   |   | Amount |   |   | Stock |   |   | Capital |   |   | Earnings |   |   | Income (Loss) |   |   | Interest |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2011                                                              |   | $ | 95,257 |   |   | $ | (137,440 | ) |   | $ | 4,908 |   |   |   | 11,941,174 |   |   | $ | 115 |   |   | $ | (6,395 | ) |   | $ | 105,388 |   |   | $ | (47,486 | ) |   | $ | (786 | ) |   | $ | 39,513 |   |
| Net loss                                                                                |   |   | (8,052 | ) |   |   | (8,052 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (6,875 | ) |   |   | - |   |   |   | (1,177 | ) |
| Sale of controlling interest                                                            |   |   | 1,149 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,149 |   |
| Acquisition of non-controlling interest                                                 |   |   | (69 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (69 | ) |
| Sale of non-controlling interest                                                        |   |   | (1,468 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,434 |   |   |   |   |   |   |   |   |   |   |   | (2,902 | ) |
| Distribution of non-controlling interest                                                |   |   | (82 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (82 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Series A preferred stock cash dividend ($1.00 per share)                                |   |   | (613 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (613 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Balance, March 31, 2012                                                                 |   | $ | 86,122 |   |   | $ | (145,492 | ) |   | $ | 4,908 |   |   |   | 11,941,174 |   |   | $ | 115 |   |   | $ | (6,395 | ) |   | $ | 106,127 |   |   | $ | (54,361 | ) |   | $ | (786 | ) |   | $ | 36,514 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |   |

----

| AMERICAN REALTY INVESTORS, INC.                                                         |   |
|-----------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)                                  |   |
| (unaudited)                                                                             |   |
|                                                                                    |   |   |   |   |   |   |
|                                                                                    |   | For the Three Months Ended |   |
|                                                                                    |   | March 31, |   |
|                                                                                    |   | 2012 |   |   | 2011 |   |
|                                                                                    |   | (dollars in thousands) |   |
|                                                                                    |   |   |   |   |   |   |
| Net loss                                                                                |   | $ | (8,052 | ) |   | $ | (11,373 | ) |
| Other comprehensive loss                                                                |   |   |   |   |   |   |   |   |
| Unrealized loss on foreign currency translation                                         |   |   | - |   |   |   | (786 | )  |
| Unrealized gain (loss) on investment securities                                         |   |   | - |   |   |   | - |   |
| Total other comprehensive loss                                                          |   |   | - |   |   |   | (786 | )  |
| Comprehensive loss                                                                      |   |   | (8,052 | ) |   |   | (12,159 | ) |
| Comprehensive loss attributable to non-controlling interest                             |   |   | 1,177 |   |   |   | 2,170 |   |
| Comprehensive loss attributable to American Realty Investors, Inc.                      |   | $ | (6,875 | ) |   | $ | (9,989 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |   |

----

| AMERICAN REALTY INVESTORS, INC.                                                                                                                                                                                               |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                                                                                                                         |   |
| (unaudited)                                                                                                                                                                                                                   |   |
|                                                                                                                                                                                                                          |   | For the Three Months Ended |   |
|                                                                                                                                                                                                                          |   | March 31, |   |
|                                                                                                                                                                                                                          |   | 2012 |   |   | 2011 |   |
|                                                                                                                                                                                                                          |   | (dollars in thousands) |   |
| Cash Flow From Operating Activities:                                                                                                                                                                                          |   |   |   |   |   |   |
| Net loss                                                                                                                                                                                                                      |   | $ | (8,052 | ) |   | $ | (11,373 | ) |
| Adjustments to reconcile net loss applicable to common shares to net cash used in operating activities:                                                                                                                  |   |
|                    Gain on sale of land                                                                                        |   |   | 1,021 |   |   |   | (5,344 | ) |
|                    Gain on sale of income producing properties                                                                 |   |   | (3,588 | ) |   |   | (4,137 | ) |
|                    Depreciation and amortization                                                                               |   |   | 5,746 |   |   |   | 7,188 |   |
|                    Provision for impairment of notes receivable and real estate assets                                         |   |   | - |   |   |   | 6,059 |   |
|                    Amortization of deferred borrowing costs                                                                    |   |   | 917 |   |   |   | 1,108 |   |
|                    Earnings from unconsolidated subsidiaries and investees                                                     |   |   | (117 | ) |   |   | 95 |   |
|       (Increase) decrease in assets:                                                                                                                                                            |   |   |   |   |   |   |   |   |
|                    Accrued interest receivable                                                                                 |   |   | (2,544 | ) |   |   | (740 | ) |
|                    Other assets                                                                                                |   |   | - |   |   |   | 827 |   |
|                    Prepaid expense                                                                                             |   |   | 68 |   |   |   | 919 |   |
|                    Escrow                                                                                                      |   |   | 7,814 |   |   |   | 11,227 |   |
|                    Rent receivables                                                                                            |   |   | (302 | ) |   |   | (535 | ) |
|                    Affiliate receivable                                                                                        |   |   | - |   |   |   | (4,048 | ) |
|       Increase (decrease) in liabilities:                                                                                                                                                       |   |   |   |   |   |   |   |   |
|                    Accrued interest payable                                                                                    |   |   | (1,047 | ) |   |   | 5,677 |   |
|                    Affiliate payables                                                                                          |   |   | (9,656 | ) |   |   | (12,219 | ) |
|    Other liabilities                                                                                                                                                                                           |   |   | (13,106 | ) |   |   | (11,007 | ) |
|                               Net cash used in operating activities     |   |   | (22,846 | ) |   |   | (16,303 | ) |
|                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| Cash Flow From Investing Activities:                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
|       Proceeds from notes receivables                                                                                                                                                           |   |   | 12,776 |   |   |   | 9,391 |   |
|       Origination of notes receivable                                                                                                                                                           |   |   | (9,279 | ) |   |   | - |   |
|       Proceeds from sales of income producing properties                                                                                                                                        |   |   | 18,678 |   |   |   | 3,912 |   |
|       Proceeds from sale of land                                                                                                                                                                |   |   | 10,897 |   |   |   | 46,657 |   |
|       Proceeds from sale of investment in unconsolidated real estate entities                                                                                                                   |   |   | - |   |   |   | 897 |   |
|       Proceeds from sale of investments                                                                                                                                                         |   |   | 114 |   |   |   | - |   |
|       Investment in unconsolidated real estate entities                                                                                                                                         |   |   | 2,898 |   |   |   | (111 | ) |
|       Improvement of land held for development                                                                                                                                                  |   |   | (136 | ) |   |   | (1,214 | ) |
|       Improvement of income producing properties                                                                                                                                                |   |   | (394 | ) |   |   | (386 | ) |
|       Acquisition of non-controlling interest                                                                                                                                                   |   |   | (138 | ) |   |   | (23 | ) |
|       Sale of non-controlling interest                                                                                                                                                          |   |   | (1,468 | ) |   |   | - |   |
|       Sale of controlling interest                                                                                                                                                              |   |   | 1,262 |   |   |   | 2,012 |   |
|       Construction and development of new properties                                                                                                                                            |   |   | (3,189 | ) |   |   | (14,087 | ) |
|                               Net cash provided by investing activities |   |   | 32,021 |   |   |   | 47,048 |   |
|                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| Cash Flow From Financing Activities:                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
|       Proceeds from notes payable                                                                                                                                                               |   |   | 60,915 |   |   |   | 30,812 |   |
|       Recurring amortization of principal on notes payable                                                                                                                                      |   |   | (6,027 | ) |   |   | (3,294 | ) |
|       Debt assumption by buyer, part of seller proceeds                                                                                                                                         |   |   | (17,073 | ) |   |   | - |   |
|       Payments on maturing notes payable                                                                                                                                                        |   |   | (56,474 | ) |   |   | (64,409 | ) |
|       Stock-secured borrowings and margin debt                                                                                                                                                  |   |   | - |   |   |   | 3,164 |   |
|       Deferred financing costs                                                                                                                                                                  |   |   | (1,972 | ) |   |   | (260 | ) |
|       Distributions to non-controlling interests                                                                                                                                                |   |   | (82 | ) |   |   | (366 | ) |
|       Preferred stock dividends - Series A                                                                                                                                                      |   |   | (613 | ) |   |   | (617 | ) |
|       Repurchase of common stock/treasury stock                                                                                                                                                 |   |   | - |   |   |   | (62 | ) |
|       Conversion of preferred stock into common stock                                                                                                                                           |   |   | - |   |   |   | 31 |   |
|                               Net cash used in financing activities     |   |   | (21,326 | ) |   |   | (35,001 | ) |
|                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| Net decrease in cash and cash equivalents                                                                                                                                                                                     |   |   | (12,151 | ) |   |   | (4,256 | ) |
| Cash and cash equivalents, beginning of period                                                                                                                                                                                |   |   | 20,312 |   |   |   | 12,649 |   |
| Cash and cash equivalents, end of period                                                                                                                                                                                      |   | $ | 8,161 |   |   | $ | 8,393 |   |
|                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                                                                                                                                                            |   |   |   |   |   |   |   |   |
| Cash paid for interest                                                                                                                                                                                                        |   | $ | 47,231 |   |   | $ | 16,795 |   |
|                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| Schedule of noncash investing and financing activities:                                                                                                                                                                       |   |   |   |   |   |   |   |   |
| Notes receivable received from affiliate                                                                                                                                                                                      |   | $ | 6,000 |   |   | $ | - |   |

----

|   | • | 17 commercial properties consisting of 11 office buildings, one industrial warehouse, four retail properties and one parking garage, comprising in aggregate approximately 3.9 million rentable square feet; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | One hotel comprising 161 rooms; |
|--------|---------|---------------------------------|

|   | • | 49 apartment communities totaling 9,097 units, excluding apartments being developed; and |
|--------|---------|------------------------------------------------------------------------------------------|

|   | • | 5,125 acres of developed and undeveloped land. |
|--------|---------|------------------------------------------------|

----

----

|                      |                                                                                                                                                                                                                       |
|---------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Level 1 – | Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets.                                                                                                                           |
| Level 2 –           | Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| Level 3 –           | Unobservable inputs that are significant to the fair value measurement.                                                                                                                                                    |

----

----

----

| Borrower              | Date                                                                                                | Rate    | Amount                                           |                                                              | Security |                                                       |
|-----------------------|-----------------------------------------------------------------------------------------------------|---------|--------------------------------------------------|-------------------------------------------------------------------|----------|------------------------------------------------------------|
| Performing loans:     |                                                                                                |    |                                             |                                                              |     |                                                       |
|                  |      Miscellaneous non-related party notes                                 | Various | Various                                          |           4,097 |     | Various security interests                                 |   |
|                  |      Miscellaneous related party notes (1)                                 | Various | Various                                          |           2,321 |     | Various security interests                                 |   |
|                  |      Unified Housing Foundation, Inc. (Cliffs of El Dorado) (1)            | 12/27   | 5.25%                                            |           2,097 |     | 100% Interest in Unified Housing of McKinney, LLC          |   |
|                  |      Unified Housing Foundation, Inc. (Echo Station) (1)                   | 12/27   | 5.25%                                            |           1,481 |     | 100% Interest in Unified Housing of Temple, LLC            |   |
|                  |      Unified Housing Foundation, Inc. (Inwood on the Park) (1)             | 12/27   | 5.25%                                            |           5,059 |     | 100% Interest in Unified Housing Inwood, LLC               |   |
|                  |      Unified Housing Foundation, Inc. (Kensington Park) (1)                | 12/27   | 5.25%                                            |           3,936 |     | 100% Interest in Unified Housing Kensington, LLC           |   |
|                  |      Unified Housing Foundation, Inc.  (Lakeshore Villas) (1)    | 12/27   | 5.25%                                            |           2,000 |     | Unsecured                                                  |   |
|                  |      Unified Housing Foundation, Inc.  (Lakeshore Villas) (1)    | 12/27   | 5.25%                                            |           9,096 |     | Membership interest in Housing for Seniors of Humble, LLC  |
|                  |      Unified Housing Foundation, Inc. (Limestone Canyon) (1)               | 07/15   | 5.25%                                            |           3,057 |     | 100% Interest in Unified Housing of Austin, LLC            |   |
|                  |      Unified Housing Foundation, Inc. (Limestone Canyon) (1)               | 12/27   | 5.25%                                            |           4,663 |     | 100% Interest in Unified Housing of Austin, LLC            |   |
|                  |      Unified Housing Foundation, Inc. (Limestone Ranch) (1)                | 07/15   | 5.25%                                            |           2,250 |     | 100% Interest in Unified Housing of Vista Ridge, LLC       |   |
|                  |      Unified Housing Foundation, Inc. (Limestone Ranch) (1)                | 12/27   | 5.25%                                            |           6,000 |     | 100% Interest in Unified Housing of Vista Ridge, LLC       |   |
|                  |      Unified Housing Foundation, Inc. (Parkside Crossing) (1)              | 12/27   | 5.25%                                            |           2,272 |     | 100% Interest in Unified Housing of Parkside Crossing, LLC |
|                  |      Unified Housing Foundation, Inc. (Sendero Ridge) (1)                  | 07/15   | 5.25%                                            |           5,174 |     | 100% Interest in Unified Housing of Sendero Ridge, LLC     |
|                  |      Unified Housing Foundation, Inc. (Sendero Ridge) (1)                  | 12/27   | 5.25%                                            |           4,812 |     | 100% Interest in Unified Housing of Sendero Ridge, LLC     |
|                  |      Unified Housing Foundation, Inc. (Timbers of Terrell) (1)             | 12/27   | 5.25%                                            |           1,323 |     | 100% Interest in Unified Housing of Terrell, LLC           |   |
|                  |      Unified Housing Foundation, Inc. (Tivoli) (1)                         | 12/27   | 5.25%                                            |           7,965 |     | 100% Interest in Unified Housing of Tivoli, LLC            |   |
|                  |      Unified Housing Foundation, Inc. (Reserve at White Rock Phase I) (1)  | 12/27   | 5.25%                                            |           2,485 |     | 100% Interest in Unified Housing of Harvest Hill I, LLC    |
|                  |      Unified Housing Foundation, Inc. (Reserve at White Rock Phase II) (1) | 12/27   | 5.25%                                            |           2,555 |     | 100% Interest in Unified Housing of Harvest Hill, LLC      |   |
|                  |      Unified Housing Foundation, Inc. (Trails at White Rock) (1)           | 12/27   | 5.25%                                            |           3,815 |     | 100% Interest in Unified Housing of Harvest Hill III, LLC  |
|                  |      Unified Housing Foundation, Inc.(1)                                   | 12/12   | 5.00%                                            |           6,000 |     | Unsecured                                                  |   |
|                  |      Realty Advisors Management, Inc. (1)                                  | 12/16   | 4.00%                                            |         20,387            |     | Unsecured                                                  |   |
|                  |      One Realco Corporation - ART Sale (1)                                 | 01/17   | 3.00%                                            |         10,000            |     | Unsecured                                                  |   |
|                  |      Accrued interest                                                      |    |                                             |           1,965 |     |                                                       |   |
| Total Performing      |                                                                                                |    |  $ 114,810                                  |                                                              |     |                                                       |
|                  |                                                                                                |    |                                             |                                                              |     |                                                       |   |
| Non-Performing loans: |                                                                                                |    |                                             |                                                              |     |                                                       |
|                  | Ocean Beach Partners, L.P. (1)                                                                      | 12/11   | 7.00%                                            |  3,279                                                       |     | Folsom Land (36 acres in Farmers Branch, TX)               |   |
|                  | 130 Windmill Farms, L.P.                                                                       | 10/11   | 7.00%                                            |  507                                                         |     | Unsecured                                                  |   |
|                  | Dallas Fund XVII L.P. (2)                                                                           | 10/09   | 9.00%                                            |   1,432                                                 |     | Unsecured                                                  |   |
|                  | Leman Development, Ltd.                                                                        | 07/11   | 7.00%                                            |   1,500                                                 |     | Unsecured                                                  |   |
|                  | Tracy Suttles                                                                                  | 12/11   | 0.00%                                            |  1,077                                                       |     | Unsecured                                        |   |
|                  | Miscellaneous non-related party notes                                                          | Various | Various                                          |  1,019                                                       |     | Various secured interest                                   |   |
|                  | Accrued interest                                                                               |    |                                             |   346                                                   |     |                                                       |   |
| Total Non-Performing  |                                                                                                |    |  $      9,160 |                                                              |     |                                                       |
|                  |                                                                                                |    |                                             |                                                              |     |                                                       |   |
|                  | Allowance for estimated losses                                                                 |    |                                             |   (23,383)                                              |     |                                                       |   |
| Total                 |                                                                                                |    |  $ 100,587                                  |                                                              |     |                                                       |
|                  |                                                                                                |    |                                             |                                                              |     |                                                       |   |

|  (1)  Related party notes                                                     |   |   |   |   |   |   |   |   |   |   |
|----------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|  (2) Note matured and an allowance was taken for estimated losses at full value of note |   |   |

----

|                       |   | Percentage ownership as of March 31, |   |
|----------------------------|--------|--------------------------------------|--------|
|                       |   | 2012                                 |   |   | 2011 |   |
|                       |   |                                 |   |   |   |   |
| Garden Centura, L.P. (1)   |   |                                 | 0.00   | % |   |   | 5.00 | % |
| Gruppa Florentina, LLC (1) |   |                                 | 20.00  | % |   |   | 20.00 | % |
| LK-Four Hickory, LLC (1)   |   |                                 | 0.00   | % |   |   | 28.57 | % |
|                       |   |                                 |   |   |   |   |   |   |
| (1) Other investees        |   |                                 |   |   |   |   |   |   |

|                                         |   | For the Three Months ended March 31, |    |
|----------------------------------------------|--------|--------------------------------------|---------|
|                                         |   | 2012                                 |    |   | 2011 |   |
| Other Investees                              |   |                                 |    |   |   |   |
| Real estate, net of accumulated depreciation |   | $                                    | 11,703  |   |   | $ | 119,203 |   |
| Notes receivable                             |   |                                 | 5,789   |   |   |   | 5,118 |   |
| Other assets                                 |   |                                 | 30,751  |   |   |   | 42,076 |   |
| Notes payable                                |   |                                 | (13,670 | ) |   |   | (87,381 | ) |
| Other liabilities                            |   |                                 | (6,342  | ) |   |   | (15,711 | ) |
| Shareholders' equity/partners capital        |   |                                 | (28,231 | ) |   |   | (63,305 | ) |
|                                         |   |                                 |    |   |   |   |   |   |
| Revenue                                      |   | $                                    | 11,609  |   |   | $ | 14,088 |   |
| Depreciation                                 |   |                                 | (334    | ) |   |   | (1,640 | ) |
| Operating expenses                           |   |                                 | (10,388 | ) |   |   | (11,644 | ) |
| Gain on land sales                           |   |                                 | -       |   |   |   | - |   |
| Interest expense                             |   |                                 | (302    | ) |   |   | (1,185 | ) |
| Income from continuing operations            |   | $                                    | 585     |   |   | $ | (381 | ) |
| Income from discontinued operations          |   |                                 | -       |   |   |   | - |   |
| Net income                                   |   | $                                    | 585     |   |   | $ | (381 | ) |
|                                         |   |                                 |    |   |   |   |   |   |
| Company's proportionate share of earnings    |   | $                                    | 117     |   |   |   | 24 |   |

----

|                             |                            |   | Pillar  |   |
|----------------------------------|---------------------------------|--------|---------|--------|
|  Balance, December 31, 2011 |                            | $      | (10,294 | )      |
|                             | Cash transfers                  |   |    | (1,835 | ) |
|                             | Advisory fees                   |   |    | (2,658 | ) |
|                             | Commissions to Pillar/Regis     |   |    | (1,388 | ) |
|                             | Cost reimbursements             |   |    | (835   | ) |
|                             | Interest to Advisor             |   |    | (204   | ) |
|                             | POA fees                        |   |    | (52    | ) |
|                             | Net income fee                  |   |    | (42    | ) |
|                             | Expenses paid by Advisor        |   |    | (1,037 | ) |
|                             | Financing (mortgage payments)   |   |    | 1,589  |   |
|                             | Note receivable with affiliate  |   |    | 6,874  |   |
|                             | Sales/Purchases transactions    |   |    | (58    | ) |
|                             | Intercompany property transfers |   |    | 9,302  |   |
|  Balance, March 31, 2012    |                            | $      | (638    | )      |

----

|                                      |   | Commercial |    |   |       |   |    |   |   |   |   |   |   |   |    |   |   |
|-------------------------------------------|--------|------------|---------|--------|------------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|
| For the Three Months Ended March 31, 2012 |   | Properties |    |   | Apartments |   | Hotels  |   |   | Land   |   |   | Other  |   |    | Total  |   |
| Operating revenue                         |   | $          | 9,197   |   |       | $      | 20,536  |   |   | $      | 544    |   |   | $      | -       |   |   | $ | 41 |   |   | $ | 30,318 |   |
| Operating expenses                        |   |       | 5,273   |   |       |   | 9,715   |   |   |   | 553    |   |   |   | 279     |   |   |   | 388 |   |   |   | 16,208 |   |
| Depreciation and amortization             |   |       | 1,671   |   |       |   | 3,886   |   |   |   | 15     |   |   |   | -       |   |   |   | (69 | ) |   |   | 5,503 |   |
| Mortgage and loan interest                |   |       | 2,995   |   |       |   | 10,922  |   |   |   | 62     |   |   |   | 1,704   |   |   |   | 2,052 |   |   |   | 17,735 |   |
| Interest income                           |   |       | -       |   |       |   | -       |   |   |   | -      |   |   |   |    |   |   |   | 3,340 |   |   |   | 3,340 |   |
| Loss on land sales                        |   |       | -       |   |       |   | -       |   |   |   | -      |   |   |   | (1,021  | )      |   |   | - |   |   |   | (1,021 | ) |
| Segment operating gain (loss)             |   | $          | (742    | )      |       | $      | (3,987  | )      |   | $      | (86    | )      |   | $      | (3,004  | )      |   | $ | 1,010 |   |   | $ | (6,809 | ) |
| Capital expenditures                      |   |       | 447     |   |       |   | 198     |   |   |   | -      |   |   |   | 5       |   |   |   | - |   |   |   | 650 |   |
| Assets                                    |   |       | 172,663 |   |       |   | 564,401 |   |   |   | 192    |   |   |   | 229,421 |   |   |   | - |   |   |   | 966,677 |   |
|                                      |   |       |    |   |       |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Property Sales                            |   |       |    |   |       |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Sales price                               |   | $          | -       |   |       | $      | 21,146  |   |   | $      | -      |   |   | $      | 11,543  |   |   | $ | - |   |   | $ | 32,689 |   |
| Cost of sale                              |   |       | -       |   |       |   | 17,558  |   |   |   | -      |   |   |   | 12,564  |   |   |   | - |   |   |   | 30,122 |   |
| Deferred current gain                     |   |       | -       |   |       |   | -       |   |   |   | -      |   |   |   | -       |   |   |   | - |   |   |   | - |   |
| Recognized prior deferred gain            |   |       | -       |   |       |   | -       |   |   |   | -      |   |   |   | -       |   |   |   | - |   |   |   | - |   |
| Gain (loss) on sale                       |   | $          | -       |   |       | $      | 3,588   |   |   | $      | -      |   |   | $      | (1,021  | )      |   | $ | - |   |   | $ | 2,567 |   |
|                                      |   |       |    |   |       |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
|                                      |   |       |    |   |       |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
|                                      |   | Commercial |    |   |       |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
| For the Three Months Ended March 31, 2011 |   | Properties |    |   | Apartments |   | Hotels  |   |   | Land   |   |   | Other  |   |    | Total  |   |
| Operating revenue                         |   | $          | 9,322   |   |       | $      | 17,798  |   |   | $      | 520    |   |   | $      | 270     |   |   | $ | 8 |   |   | $ | 27,918 |   |
| Operating expenses                        |   |       | 5,868   |   |       |   | 8,973   |   |   |   | 452    |   |   |   | 577     |   |   |   | 49 |   |   |   | 15,919 |   |
| Depreciation and amortization             |   |       | 1,978   |   |       |   | 3,376   |   |   |   | 16     |   |   |   | -       |   |   |   | (88 | ) |   |   | 5,282 |   |
| Mortgage and loan interest                |   |       | 2,495   |   |       |   | 6,744   |   |   |   | 62     |   |   |   | 3,800   |   |   |   | 1,565 |   |   |   | 14,666 |   |
| Interest income                           |   |       | -       |   |       |   | -       |   |   |   | -      |   |   |   |    |   |   |   | 668 |   |   |   | 668 |   |
| Gain on land sales                        |   |       | -       |   |       |   | -       |   |   |   | -      |   |   |   | 5,344   |   |   |   | - |   |   |   | 5,344 |   |
| Segment operating gain (loss)             |   | $          | (1,019  | )      |       | $      | (1,295  | )      |   | $      | (10    | )      |   | $      | 1,237   |   |   | $ | (850 | ) |   | $ | (1,937 | ) |
| Capital expenditures                      |   |       | 61,254  |   |       |   | 10,920  |   |   |   | 2,792  |   |   |   | 8,924   |   |   |   | 16 |   |   |   | 83,906 |   |
| Assets                                    |   |       | 182,828 |   |       |   | 541,572 |   |   |   | 252    |   |   |   | 389,805 |   |   |   | (18,991 | ) |   |   | 1,095,466 |   |
|                                      |   |       |    |   |       |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Property Sales                            |   |       |    |   |       |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Sales price                               |   | $          | 5,168   |   |       | $      | -       |   |   | $      | -      |   |   | $      | 50,532  |   |   | $ | - |   |   | $ | 55,700 |   |
| Cost of sale                              |   |       | 4,882   |   |       |   | -       |   |   |   | -      |   |   |   | 46,328  |   |   |   | - |   |   |   | 51,210 |   |
| Deferred current gain                     |   |       | -       |   |       |   | -       |   |   |   | -      |   |   |   | -       |   |   |   | - |   |   |   | - |   |
| Recognized prior deferred gain            |   |       | 3,851   |   |       |   | -       |   |   |   | -      |   |   |   | 1,140   |   |   |   | - |   |   |   | 4,991 |   |
| Gain on sale                              |   | $          | 4,137   |   |       | $      | -       |   |   | $      | -      |   |   | $      | 5,344   |   |   | $ | - |   |   | $ | 9,481 |   |

----

|                                                               |   | For Three Months Ended March 31, |    |
|--------------------------------------------------------------------|--------|----------------------------------|---------|
| For the Three Months Ended March 31, 2012                          |   | 2012                             |    |   | 2011 |   |
| Segment operating loss                                             |   | $                                | (6,809  | ) |   | $ | (1,937 | ) |
| Other non-segment items of income (expense)                        |   |                             |    |   |   |   |   |   |
| General and administrative                                         |   |                             | (3,181  | ) |   |   | (3,242 | ) |
| Advisory fees                                                      |   |                             | (2,658  | ) |   |   | (3,522 | ) |
| Provision on impairment of notes receivable and real estate assets |   |                             | -       |   |   |   | (5,178 | ) |
| Other income                                                       |   |                             | 1,628   |   |   |   | 1,214 |   |
| Loss on sale of investments                                        |   |                             | (362    | ) |   |   | - |   |
| Equity in earnings of investees                                    |   |                             | 117     |   |   |   | (95 | ) |
| Income tax benefit                                                 |   |                             | 1,125   |   |   |   | 485 |   |
| Loss from continuing operations                                    |   | $                                | (10,140 | ) |   | $ | (12,275 | ) |

|                                    |   | For Three Months Ended March 31, |      |
|-----------------------------------------|--------|----------------------------------|-----------|
|                                    |   | 2012                             |      |   | 2011 |   |
| Segment assets                          |   | $                                | 966,677   |   |   | $ | 1,095,466 |   |
| Investments in real estate partnerships |   |                             | 7,848     |   |   |   | 12,152 |   |
| Other assets and receivables            |   |                             | 178,466   |   |   |   | 188,530 |   |
| Assets held for sale                    |   |                             | 28,663    |   |   |   | 199,485 |   |
| Total assets                            |   | $                                | 1,181,654 |   |   | $ | 1,495,633 |   |

----

|                                                                                       |   | For the Three Months Ended |   |
|--------------------------------------------------------------------------------------------|--------|----------------------------|--------|
|                                                                                       |   | March 31,                  |   |
|                                                                                       |   | 2012                       |   |   | 2011 |   |
| Revenue                                                                                    |   |                       |   |   |   |   |
|      Rental                                                       |   | $                          | 1,359  |   |   | $ | 11,176 |   |
|      Property operations                                          |   |                       | 1,027  |   |   |   | 7,541 |   |
|                                                                                       |   | $                          | 332    |   |   | $ | 3,635 |   |
| Expenses                                                                                   |   |                       |   |   |   |   |   |   |
|      Interest                                                     |   |                       | (368   | ) |   |   | (3,237 | ) |
|      General and administration                                   |   |                       | (97    | ) |   |   | (361 | ) |
|      Depreciation                                                 |   |                       | (242   | ) |   |   | (1,906 | ) |
|      Provision on impairment of real estate assets                |   |                       | -      |   |   |   | (881 | ) |
|                                                                                       |   | $                          | (707   | ) |   | $ | (6,385 | ) |
| Net loss from discontinued operations before gains on sale of real estate, taxes, and fees |   |                       | (375   | ) |   |   | (2,750 | ) |
|      Gain on sale of discontinued operations                      |   |                       | 3,588  |   |   |   | 4,137 |   |
| Income from discontinued operations before tax                                             |   | $                          | 3,213  |   |   | $ | 1,387 |   |
|      Income tax expense                                           |   |                       | (1,125 | ) |   |   | (485 | ) |
| Income from discontinued operations                                                        |   | $                          | 2,088  |   |   | $ | 902 |   |

----

----

|   | • | general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on tenants’ financial condition, and competition from other developers, owners and operators of real estate); |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | risks associated with the availability and terms of construction and mortgage financing and the use of debt to fund acquisitions and developments; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | demand for apartments and commercial properties in the Company’s markets and the effect on occupancy and rental rates; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------|

|   | • | the Company’s ability to obtain financing, enter into joint venture arrangements in relation to or self-fund the development or acquisition of properties; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | risks associated with the timing and amount of property sales and the resulting gains/losses associated with such sales; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------|

|   | • | failure to manage effectively our growth and expansion into new markets or to integrate acquisitions successfully; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------|

|   | • | risks and uncertainties affecting property development and construction (including, without limitation, construction delays, cost overruns, inability to obtain necessary permits and public opposition to such activities); |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | risks associated with downturns in the national and local economies, increases in interest rates, and volatility in the securities markets; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | costs of compliance with the Americans with Disabilities Act and other similar laws and regulations; |
|--------|---------|------------------------------------------------------------------------------------------------------|

|   | • | potential liability for uninsured losses and environmental contamination; |
|--------|---------|---------------------------------------------------------------------------|

|   | • | risks associated with our dependence on key personnel whose continued service is not guaranteed; and |
|--------|---------|------------------------------------------------------------------------------------------------------|

|   | • | the other risk factors identified in this Form 10-Q, including those described under the caption “Risk Factors.” |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

|                      |                                                                                                                                                                                                                       |
|---------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Level 1 – | Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets.                                                                                                                           |
| Level 2 –           | Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| Level 3 –           | Unobservable inputs that are significant to the fair value measurement.                                                                                                                                                    |

|                     |   | March 31, |   |
|--------------------------|--------|-----------|--------|
|                     |   | 2012      |   |   | 2011 |   |
| Continuing operations    |   |      | 62     |   |   |   | 55 |   |
| Discontinued operations  |   |      | 2      |   |   |   | 15 |   |
| Total property portfolio |   |      | 64     |   |   |   | 70 |   |

----

----

|                                                                                       |   | For the Three Months Ended |   |
|--------------------------------------------------------------------------------------------|--------|----------------------------|--------|
|                                                                                       |   | March 31,                  |   |
|                                                                                       |   | 2012                       |   |   | 2011 |   |
| Revenue                                                                                    |   |                       |   |   |   |   |
|      Rental                                                       |   | $                          | 1,359  |   |   | $ | 11,176 |   |
|      Property operations                                          |   |                       | 1,027  |   |   |   | 7,541 |   |
|                                                                                       |   | $                          | 332    |   |   | $ | 3,635 |   |
| Expenses                                                                                   |   |                       |   |   |   |   |   |   |
|      Interest                                                     |   |                       | (368   | ) |   |   | (3,237 | ) |
|      General and administration                                   |   |                       | (97    | ) |   |   | (361 | ) |
|      Depreciation                                                 |   |                       | (242   | ) |   |   | (1,906 | ) |
|      Provision on impairment of real estate assets                |   |                       | -      |   |   |   | (881 | ) |
|                                                                                       |   | $                          | (707   | ) |   | $ | (6,385 | ) |
| Net loss from discontinued operations before gains on sale of real estate, taxes, and fees |   |                       | (375   | ) |   |   | (2,750 | ) |
|      Gain on sale of discontinued operations                      |   |                       | 3,588  |   |   |   | 4,137 |   |
| Income from discontinued operations before tax                                             |   | $                          | 3,213  |   |   | $ | 1,387 |   |
|      Income tax expense                                           |   |                       | (1,125 | ) |   |   | (485 | ) |
| Income from discontinued operations                                                        |   | $                          | 2,088  |   |   | $ | 902 |   |

|   | • | fund normal recurring expenses; |
|--------|---------|---------------------------------|

|   | • | meet debt service and principal repayment obligations including balloon payments on maturing debt; |
|--------|---------|----------------------------------------------------------------------------------------------------|

|   | • | fund capital expenditures, including tenant improvements and leasing costs; |
|--------|---------|-----------------------------------------------------------------------------|

|   | • | fund development costs not covered under construction loans; and |
|--------|---------|------------------------------------------------------------------|

|   | • | fund possible property acquisitions. |
|--------|---------|--------------------------------------|

|   | • | property operations; |
|--------|---------|----------------------|

|   | • | proceeds from land and income-producing property sales; |
|--------|---------|---------------------------------------------------------|

|   | • | collection of mortgage notes receivable; |
|--------|---------|------------------------------------------|

|   | • | collection of receivables from affiliated companies; |
|--------|---------|------------------------------------------------------|

|   | • | refinancing of existing debt; and |
|--------|---------|-----------------------------------|

|   | • | additional borrowing, including mortgage notes payable and lines of credit. |
|--------|---------|-----------------------------------------------------------------------------|

----

|                                      |   | March 31, |    |   |   |   |
|-------------------------------------------|--------|-----------|---------|--------|--------|--------|
|                                      |   | 2012      |    |   | 2011   |   |   | Variance |   |
|                                      |   |      |    |   |   |   |   |   |   |
| Net cash used in operating activities     |   | $         | (22,846 | )      |   | $      | (16,303 | ) |   | $ | (6,543 | ) |
| Net cash provided by investing activities |   | $         | 32,021  |   |   | $      | 47,048 |   |   | $ | (15,027 | ) |
| Net cash used in financing activities     |   | $         | (21,326 | )      |   | $      | (35,001 | ) |   | $ | 13,675 |   |

----

|                                            |   |    |    |   | Weighted           |   |   | Effect of 1% |   |
|-------------------------------------------------|--------|---------|---------|--------|--------------------|--------|--------|------------------------|--------|
|                                            |   |    |    |   | Average            |   |   | Increase In            |   |
|                                            |   | Balance |    |   | Interest Rate |   |   | Base Rates             |   |
| Notes payable:                                  |   |    |    |   |               |   |   |                   |   |
| Variable rate                                   |   | $       | 183,688 |   |               |   | 5.04   | %                      |   | $ | 1,837 |   |
| Total decrease in ARL’s annual net income |   |    |    |   |               |   |   |                   |   |   | 1,837 |   |
| Per share                                       |   |    |    |   |               |   |   |                   |   | $ | 0.16 |   |

----

|                         |   |             |   |   |           |   |    | Total Number of     |   |   | Maximum Number of |   |
|------------------------------|--------|------------------|--------|--------|----------------|--------|---------|---------------------|--------|--------|-------------------|--------|
|                         |   |             |   |   |           |   |    | Shares Purchased    |   |   | Shares that May   |   |
|                         |   | Total Number of  |   |   | Average Price  |   |    | as Part of Publicly |   |   | Yet be Purchased  |   |
| Period                       |   | Shares Purchased |   |   | Paid per share |   |    | Announced Program   |   |   | Under the Program |   |
| Balance at December 31, 2011 |   |             |   |   |           |   | 986,750 |                |   |   | 263,250           |   |
| January 31, 2012             |   |             | -      |   |           | $      | -       |                |   |   | 986,750           |   |   |   | 263,250 |   |
| February 29, 2012            |   |             | -      |   |           | $      | -       |                |   |   | 986,750           |   |   |   | 263,250 |   |
| March 31, 2012               |   |             | -      |   |           | $      | -       |                |   |   | 986,750           |   |   |   | 263,250 |   |
| Total                        |   |             | -      |   |           |   |    |                |   |   |              |   |   |   |   |   |

|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber                           | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                      |
|          3.0   | Certificate of Restatement of Articles of Incorporation of American Realty Investors, Inc. dated August 3, 2000 (incorporated by reference to Exhibit 3.0 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).                                                                                                                                |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
|          3.1   | Certificate of Correction of Restated Articles of Incorporation of American Realty Investors, Inc. dated August 29, 2000 (incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q dated September 30, 2000).                                                                                                                                 |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
|          3.2   | Articles of Amendment to the Restated Articles of Incorporation of American Realty Investors, Inc. decreasing the number of authorized shares of and eliminating Series B Cumulative Convertible Preferred Stock dated August 23, 2003 (incorporated by reference to Exhibit 3.3 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).   |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
|          3.3   | Articles of Amendment to the Restated Articles of Incorporation of American Realty Investors, Inc., decreasing the number of authorized shares of and eliminating Series I Cumulative Preferred Stock dated October 1, 2003 (incorporated by reference to Exhibit 3.4 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).                        |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
|          3.4   | Bylaws of American Realty Investors, Inc. (incorporated by reference to Exhibit 3.2 to Registrant’s Registration Statement on Form S-4 filed December 30, 1999).                                                                                                                                                                                                                                |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
|          4.1   | Certificate of Designations, Preferences and Relative Participating or Optional or Other Special Rights, and Qualifications, Limitations or Restrictions Thereof of Series F Redeemable Preferred Stock of American Realty Investors, Inc., dated June 11, 2001 (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001). |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
|          4.2   | Certificate of Withdrawal of Preferred Stock, Decreasing the Number of Authorized Shares of and Eliminating Series F Redeemable Preferred Stock, dated June 18, 2002 (incorporated by reference to Exhibit 3.0 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).                                                                                          |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
|          4.3   | Certificate of Designation, Preferences and Rights of the Series I Cumulative Preferred Stock of American Realty Investors, Inc., dated February 3, 2003 (incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002).                                                                                                        |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
|          4.4   | Certificate of Designation for Nevada Profit Corporations designating the Series J 8% Cumulative Convertible Preferred Stock as filed with the Secretary of State of Nevada on March 16, 2006 (incorporated by reference to Registrant current report on Form 8-K for event of March 16, 2006).                                                                                                       |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.1                                                        | Advisory Agreement between American Realty Investors, Inc. and Pillar Income Asset Management, Inc., dated April 30, 2011 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, dated May 2, 2011).                                                                                                                                              |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.2                                                        | Second Amendment to Modification of Stipulation of Settlement dated October 17, 2001 (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-4, dated February 24, 2002).                                                                                                                                                                               |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
| 31.1*                                                                 | Certification by the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                            |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
| 31.2*                                                                 | Certification by the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                            |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
| 32.1*                                                                 | Certification pursuant to 18 U.S.C. 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                        |
|                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                  |
|  101                                                             | Interactive data files pursuant to Rule 405 of Regulation S-T.                                                                                                                                                                                                                                                                                                                                   |

| * | Filed herewith |
|---|----------------|

----

|               |                            |                                                                              |
|--------------------|---------------------------------|-----------------------------------------------------------------------------------|
|               | AMERICAN REALTY INVESTORS, INC. |
|               |                            |                                                                              |
| Date: May 15, 2012 | By:                             | /s/ Daniel J. Moos                                                                |
|               |                            |                                                                              |
|               |                            | Daniel J. Moos                                                                    |
|               |                            | President and Chief Executive Officer(Principal Executive Officer)                |
|               |                            |                                                                              |
| Date: May 15, 2012 | By:                             | /s/ Gene S. Bertcher                                                              |
|               |                            |                                                                              |
|               |                            | Gene S. Bertcher                                                                  |
|               |                            | Executive Vice President and Chief Financial Officer(Principal Financial Officer) |

----

|                                                                    |                                                                                                                                       |
|-------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber                             | Description of Exhibits                                                                                                          |
|            31.1* | Certification by the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended. |
|                                                                    |                                                                                                                                       |
|            31.2* | Certification by the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended. |
|                                                                    |                                                                                                                                       |
|            32.1* | Certification pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                             |

| * | Filed herewith |
|---|----------------|

----