<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549


                                   FORM 10-Q



             [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1999
                                                            -------------


                         Commission File Number 1-9948
                                                ------


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


                 Georgia                                       54-0697989
    -------------------------------                      ---------------------
    (State or Other Jurisdiction of                         (I.R.S. Employer
     Incorporation or Organization)                       Identification No.)


      10670 North Central Expressway, Suite 300, Dallas, Texas      75231
    ----------------------------------------------------------------------
      (Address of Principal Executive Offices)                   (Zip Code)


                                (214) 692-4700
                        ------------------------------
                        (Registrant's Telephone Number,
                             Including Area Code)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes  X    No
    ---      ---


                     APPLICABLE ONLY TO CORPORATE ISSUERS:


Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.


Common Stock, $.01 par value                                10,563,434
----------------------------                    --------------------------------
          (Class)                                (Outstanding at July 31, 1999)

                                       1
<PAGE>

                        PART I.  FINANCIAL INFORMATION



ITEM 1.   FINANCIAL STATEMENTS

The accompanying Consolidated Financial Statements have not been examined by
independent certified public accountants but in the opinion of the management of
American Realty Trust, Inc. (the "Company"), all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of consolidated
results of operations, consolidated financial position and consolidated cash
flows at the dates and for the periods indicated, have been included.


                          AMERICAN REALTY TRUST, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                       June 30,    December 31,
                                                         1999         1998
                                                     ------------  ------------
                                                       (dollars in thousands)
<S>                                                  <C>           <C>
                     Assets
                     ------

Notes and interest receivable
  Performing ($5,837 in 1999 and $594 in 1998 from
   affiliates).......................................  $ 88,891      $ 47,823
  Nonperforming......................................     5,886         6,807
                                                       --------      --------
                                                         94,777        54,630

Less - allowance for estimated losses................    (2,577)       (2,577)
                                                       --------      --------
                                                         92,200        52,053

Real estate held for sale............................   319,767       282,301


Real estate held for investment, net of accumulated
  depreciation ($204,407 in 1999 and $208,396 in
  1998)..............................................   449,496       452,606

Pizza parlor equipment, net of accumulated
  depreciation ($2,078 in 1999 and $1,464 in 1998)...     6,986         6,859

Marketable equity securities, at market value........       690         2,899
Cash and cash equivalents............................     6,075        11,523
Investments in equity investees......................    37,324        34,433
Intangibles, net of accumulated amortization
  ($1,546 in 1999 and $1,298 in 1998)................    14,528        14,776
Other assets.........................................    39,443        61,155
                                                       --------      --------

                                                       $966,509      $918,605
                                                       ========      ========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       2
<PAGE>

                          AMERICAN REALTY TRUST, INC.
                    CONSOLIDATED BALANCE SHEETS - Continued


<TABLE>
<CAPTION>
                                                         June 30,    December 31,
                                                           1999          1998
                                                       ------------  ------------
                                                         (dollars in thousands,
                                                            except per share)
<S>                                                    <C>           <C>
      Liabilities and Stockholders' Equity
      ------------------------------------

Liabilities
Notes and interest payable ($13,200 in 1999 and
  $12,600 in 1998 to affiliates)..................       $  800,827     $ 768,272
Margin borrowings.................................           35,584        35,773
Accounts payable and other liabilities (including
  $27,201 in 1999 and $8,900 in 1998 to affiliates)          51,259        38,321
                                                         ----------     ---------

                                                            887,670       842,366

Minority interest.................................           50,416        37,967


Commitments and contingencies


Stockholders' equity
Preferred Stock, $2.00 par value, authorized
  20,000,000 shares, issued and outstanding
  Series F, 3,350,000 shares in 1999 and 1998
   (liquidation preference $33,500)...............            6,100         6,100
   Series G, 1,000 shares in 1999 and 1998
   (liquidation preference $100)..................                2             2
Common stock, $.01 par value; authorized
  100,000,000 shares, issued 13,496,382 shares
  in 1999 and 13,479,348 in 1998..................              135           133
Paid-in capital...................................           83,947        83,945
Accumulated (deficit).............................          (61,733)      (51,880)
Treasury stock at cost, 2,737,216 shares in 1999
  and 1998........................................              (28)          (28)
                                                         ----------     ---------

                                                             28,423        38,272
                                                         ----------     ---------


                                                         $  966,509     $ 918,605
                                                         ==========     =========

</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       3
<PAGE>

                          AMERICAN REALTY TRUST, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                            For the Three Months         For the Six Months
                                                               Ended June 30,               Ended June 30,
                                                            -------------------         --------------------
                                                              1999       1998             1999        1998
                                                             ------     ------           ------      ------
                                                                 (dollars in thousands, except per share)
<S>                                                        <C>         <C>              <C>         <C>
Income
 Sales........................................              $  7,829    $  7,332        $ 14,953    $ 14,085
 Rents........................................                41,623      15,741          81,865      27,308
 Interest.....................................                 1,846          16           3,698         154
 Other........................................                   670        (399)         (1,040)       (608)
                                                            --------    --------        --------    --------
                                                              51,968      22,690          99,476      40,939
                                                            --------    --------        --------    --------

Expenses
 Cost of sales................................                 6,624       6,225          12,798      12,005
 Property operations..........................                25,523      11,541          53,401      21,204
 Interest.....................................                24,426      13,001          45,540      22,537
 Advisory and servicing fees
   to affiliate...............................                 1,385         949           2,486       1,709
 General and administrative...................                 4,797       1,942           8,850       4,227
 Depreciation and
   amortization...............................                 4,537       1,727           9,017       2,959
 Provision for loss...........................                 2,027           -           2,027           -
 Litigation settlement........................                    91           -             275           -
 Minority interest............................                 6,931         445          15,373         933
                                                            --------    --------        --------    --------
                                                              76,341      35,830         149,767      65,574
                                                            --------    --------        --------    --------

(Loss) from operations........................               (24,373)    (13,140)        (50,291)    (24,635)

Equity in income of investees.                                 4,121      18,943           3,396      21,330
Gains on sale of real estate..................                21,201       8,974          38,717       8,974
                                                            --------    --------        --------    --------

Net income (loss).............................                   949      14,777          (8,178)      5,669

Preferred dividend requirement                                  (568)        (84)         (1,134)       (135)
                                                            --------    --------        --------    --------

Net income (loss) applicable
  to Common shares............................              $    381    $ 14,693        $ (9,312)   $  5,534
                                                            ========    ========        ========    ========

Earnings per share

  Net income (loss)...........                              $    .04    $   1.38        $   (.87)   $    .53
                                                            ========    ========        ========    ========



Weighted average Common shares
  used in computing earnings
  per share...................                            10,759,166  10,732,266      10,750,790  10,724,507
                                                          ==========  ==========      ==========  ==========
</TABLE>


The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       4
<PAGE>

                          AMERICAN REALTY TRUST, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    For the Six Months Ended June 30, 1999

<TABLE>
                                    Series F     Series G
                                    Preferred    Preferred     Common      Treasury     Paid-in     Accumulated   Stockholders'
                                      Stock        Stock       Stock        Stock       Capital      (Deficit)       Equity
                                    ---------    ---------   ---------    --------     ---------    -----------   ------------
                                                              (dollars in thousands, except per share)
<S>                                 <C>          <C>         <C>          <C>          <C>           <C>            <C>
Balance, January 1, 1999.....       $  6,100     $      2    $    133     $    (28)    $ 83,945      $(51,880)      $ 38,272


Dividends
  Common Stock ($.05 per
    share)...................            -           -            -            -           -             (541)          (541)
  Series F Preferred Stock
   ($.50 per share)..........            -           -            -            -           -           (1,129)        (1,129)
  Series G Preferred Stock
   ($5.00 per share).........            -           -            -            -           -               (5)            (5)

Sale of Common Stock under
 dividend reinvestment plan..            -           -              2          -              2            -               4


Net income...................            -           -            -            -           -           (8,178)        (8,178)
                                    --------     --------    --------     --------     --------      --------       --------

Balance, June 30, 1999.......       $  6,100     $      2    $    135     $    (28)    $ 83,947      $(61,733)      $ 28,423
                                    ========     ========    ========     ========     ========      ========       ========
</TABLE>


The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       5
<PAGE>

                          AMERICAN REALTY TRUST, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                For the Six Months
                                                                  Ended June 30,
                                                                ------------------
                                                                  1999      1998
                                                                -------   --------
<S>                                                           <C>         <C>
Cash Flows from Operating Activities                          (dollars in thousands)
 Pizza parlor sales collected...................                $ 15,635  $ 14,029
 Rents collected................................                  97,048    23,512
 Interest collected.............................                   1,027       381
 Distributions from equity investees' operating
  cash flow.....................................                     849     8,498
 Payments for pizza parlor operations...........                 (12,873)  (13,781)
 Payments for property operations...............                 (63,096)  (18,428)
 Interest paid..................................                 (39,003)  (16,497)
 Advisory and servicing fees paid to affiliate..                  (2,487)   (1,709)
 General and administrative expenses paid.......                  (8,899)   (4,232)
 Other..........................................                   5,345      (861)
                                                                --------  --------
   Net cash (used in) operating activities......                  (6,454)   (9,088)

Cash Flows From Investing Activities
 Collections on notes receivable................                  13,170     7,653
 Funding of notes receivable....................                 (30,717)     (268)
 Pizza parlor equipment purchased...............                    (578)     (787)
 Proceeds from sale of real estate..............                  60,130    34,126
 Proceeds from sale of marketable equity
  securities....................................                   1,604     3,787
 Purchases of marketable equity securities......                  (1,196)   (5,001)
 Investment in real estate entities.............                     (35)   (2,650)
 Distributions from equity investees' investing
  activities....................................                       -    13,165
 Acquisition of real estate.....................                 (36,649)  (37,283)
 Deposits.......................................                  23,578      (903)
 Real estate improvements.......................                 (13,578)   (4,807)
                                                                --------  --------
   Net cash provided by investing activities....                  15,729     7,032

Cash Flows From Financing Activities
 Proceeds from notes payable....................                  71,385    82,395
 Payments on notes payable......................                 (96,770)  (60,922)
 Deferred borrowing costs.......................                  (2,334)   (6,322)
 Net advances (payments) to/from affiliates.....                  18,281   (12,153)
 Margin borrowings, net.........................                    (693)      220
 Common dividends paid..........................                    (541)   (1,033)
 Preferred dividends paid.......................                  (1,134)      (91)
 Distributions to minority interest.............                  (2,921)     (933)
 Sale of Common Stock under dividend
  reinvestment plan.............................                       4       197
                                                                --------  --------
   Net cash provided by (used in) financing
    activities..................................                 (14,723)    1,358

   Net increase (decrease) in cash and cash
    equivalents.................................                $ (5,448) $   (698)
Cash and cash equivalents, beginning of period..                  11,523     5,347
                                                                --------  --------

Cash and cash equivalents, end of period........                $  6,075  $  4,649
                                                                ========  ========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       6
<PAGE>

                          AMERICAN REALTY TRUST, INC.
               CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

<TABLE>
<CAPTION>
                                                          For the Six Months
                                                             Ended June 30,
                                                          -------------------
                                                            1999       1998
                                                          --------   --------
                                                       (dollars in thousands)
<S>                                                    <C>          <C>
Reconciliation of net income (loss) to net cash
 provided by (used in) operating activities
 Net income (loss)......................................  $ (8,178)  $  5,669
 Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities
   Depreciation and amortization........................     9,017      2,959
   Amortization of deferred borrowing costs.............     5,907      3,462
   Gain on sale of real estate..........................   (38,717)    (8,974)
   Distributions from equity investees' operating
     cash flow..........................................       849      8,498
   Equity in (income) losses of investees...............    (3,396)   (21,330)
 Decrease in marketable equity securities...............     2,209          9
 (Increase) decrease in accrued interest
   receivable...........................................    (2,597)       346
 (Increase) decrease in other assets....................    11,674     (1,523)
 Increase in accrued interest payable...................    (1,242)       349
 Increase (decrease) in accounts payable and
  other liabilities.....................................    18,092      1,640
 Other..................................................       (72)      (193)
                                                          --------   --------
     Net cash (used in) operating activities............  $ (6,454)  $ (9,088)
                                                          ========   ========

Schedule of noncash investing and financing activities

 Notes payable from acquisition of real estate..........  $ 64,047   $ 14,619
 Notes receivable canceled on reacquisition of
  property..............................................         -      1,300
 Note receivable from sale of real estate...............    20,000          -
 Issuance of Series F Preferred Stock...................         -      1,600
 Issuance of Series G Preferred Stock...................         -        100
 Issuance of partnership units..........................     1,617          -
 Investment in properties reacquired....................         -      5,270
 Real estate obtained through foreclosure of
  mortgage note receivable..............................         -     22,715
 Provision for loss.....................................     2,027          -
 Notes payable assumed by buyer upon sale of
  properties............................................     2,428          -
 Dividend obligation discharged on conversion of
  Series B Preferred Stock..............................         -         44

Acquisition of IGI Properties

 Carrying value of mortgages assumed....................         -     43,421
 Issuance of Class A partnership units..................         -      6,568
 Carrying value of other assets.........................         -       (441)
 Carrying value of accounts payable and other
  liabilities...........................................         -        292
 Investment in partnerships.............................         -      1,980
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       7
<PAGE>

                          AMERICAN REALTY TRUST, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.   BASIS OF PRESENTATION

The accompanying Consolidated Financial Statements of American Realty Trust,
Inc. ("ART") and consolidated entities (the "Company") have been prepared in
conformity with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X.  Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.  Operating results for the six month period ended June 30, 1999, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the Consolidated
Financial Statements and Notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1998 (the "1998 Form 10-K").

Certain balances for 1998 have been reclassified to conform to the 1999
presentation.


NOTE 2.   SYNTEK ASSET MANAGEMENT, L.P.

ART owns a 96% limited partner interest in Syntek Asset Management, L.P.
("SAMLP").  Until December 18, 1998, SAMLP was the general partner of National
Realty, L.P. ("NRLP") and National Operating, L.P. ("NOLP"), the operating
partnership of NRLP (collectively the "Partnership"). Gene E. Phillips, a
Director and Chairman of the Board of the Company until November 16, 1992, is
also a general partner of SAMLP.  As of June 30, 1999, the Company owned
approximately 55% of the outstanding limited partner units of the Partnership.

The Partnership, SAMLP and Gene E. Phillips were among the defendants in a class
action lawsuit arising from the formation of the Partnership (the "Moorman
Litigation").  An agreement settling such lawsuit (the "Settlement Agreement")
for the above named defendants became effective on July 5, 1990.  The Settlement
Agreement provided for, among other things, the appointment of the Partnership
oversight committee for the Partnership and the establishment of specified
annually increasing targets for five years relating to the price of the
Partnership's units of limited partner interest.

The Settlement Agreement provided for the resignation and replacement of SAMLP
as general partner if the unit price targets were not met for two consecutive
anniversary dates.  The Partnership did not meet the unit price targets for the
first and second anniversary dates.

On July 15, 1998, the Partnership, SAMLP and the Partnership oversight committee
executed an Agreement for Cash Distribution and Election of Successor General
Partner (the "Cash Distribution Agreement") which provided for the nomination of
an entity affiliated with SAMLP to be the successor general partner of the
Partnership, for the distribution of $11.4 million to the plaintiff class
members and for the resolution of all related matters under the Settlement
Agreement.  On October 23,

                                       8
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 2.   SYNTEK ASSET MANAGEMENT, L.P. (Continued)

1998, the Court entered an order granting final approval of the Cash
Distribution Agreement. The Court also entered orders requiring the Partnership
to pay $404,000 in attorney's fees to Joseph B. Moorman's legal counsel, $30,000
to Joseph B. Moorman and $404,000 in attorney's fees to Robert A. McNeil's legal
counsel.

Pursuant to the order, $11.4 million was deposited by the Partnership into an
escrow account and then transferred to the control of an independent
administrator.  The distribution of cash is under the control of the independent
settlement administrator.  On March 24, 1999, the initial distribution of cash
was made to the plaintiff class members.

The proposal to elect NRLP Management Corp. ("NMC"), a wholly-owned subsidiary
of ART, as the successor general partner was submitted to the unitholders of the
Partnership for a vote at a special meeting of unitholders held on December 18,
1998.  NMC was elected by a majority of the Partnership unitholders.  The
Settlement Agreement remained in effect until December 18, 1998, when SAMLP
resigned as general partner and NMC was elected successor general partner and
took office.

Under the Cash Distribution Agreement, NMC assumed liability for SAMLP's note
for its original capital contribution to the Partnership.  In addition, NMC
assumed liability for the note which requires the repayment of the $11.4 million
paid by the Partnership under the Cash Distribution Agreement, plus the $808,000
in court ordered attorney's fees and $30,000 paid to Joseph B. Moorman.  This
note requires repayment over a 10-year period, bears interest at a variable
rate, currently 7.0% per annum, and is guaranteed by ART.  The liability assumed
under the Cash Distribution Agreement was expensed as a "litigation settlement."
An additional $184,000 was expensed as a "litigation settlement" in the first
quarter of 1999.

As of December 31, 1998, ART discontinued accounting for its investment in the
Partnership under the equity method upon the election of NMC as general partner
of the Partnership and the settlement of the Moorman Litigation.  The Company
began consolidation of the Partnership's accounts at that date and its
operations subsequent to that date.


NOTE 3.   NOTES AND INTEREST RECEIVABLE

In January 1999, the Partnership collected, in full, a mortgage note receivable
with a principal balance of $350,000.  In May 1999, the Partnership collected,
in full, a mortgage note receivable with a principal balance of $1.5 million.
In both cases, the monies received were applied to paydown a note payable
partially secured by the mortgage notes receivable.

In June 1999, a mortgage note receivable in the amount of $4.2 million matured.
The note is secured by (1) a first lien on approximately 1,000

                                       9
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 3.   NOTES AND INTEREST RECEIVABLE (Continued)

acres of land in Huerfano County, Colorado, known as Cuchara Valley Mountain Ski
Resort; (2) an assignment of a $2.0 million promissory note which is secured by
approximately 2,623 acres of land in Taos County, New Mexico, known as Ski Rio
Resort; and (3) a pledge of all related partnership interests.  The loan was
classified as nonperforming at June 30, 1999.  The Partnership is negotiating
with the borrower to extend the loans' maturity date in exchange for a principal
paydown.

During 1998 and the first six months of 1999, the Partnership funded a total of
$2.1 million of a $2.2 million loan commitment to Varner Road Partners, L.L.C.
The loan is secured by 129.77 acres of land in Riverside County, California and
a pledge of the stock of the borrower. The loan bears interest at 15.0% per
annum and matures in November 1999. All principal and interest are due at
maturity.

During 1998 and the first six months of 1999, the Partnership funded a total of
$26.0 million of a $52.5 million loan commitment to Centura Tower, Ltd.  The
loan is secured by 2.2 acres of land and an office building under construction
in Farmers Branch, Texas.  The loan bears interest at 12.0% per annum, requires
monthly payments based on net revenues after development of the land and
building and matures in January 2003.  The borrower has not obtained a
construction loan, therefore, the Partnership may be required to fund
construction costs in excess of its loan commitment, in order to preserve its
collateral interest.  Estimated cost to construct the office building is in
excess of $60.0 million.  In July 1999, the Partnership funded an additional
$4.9 million.

Beginning in 1997 and through January 1999, the Partnership funded a $1.6
million loan commitment to Bordeaux Investments Two, L.L.C. ("Bordeaux").  The
loan is secured by (1) a 100% interest in Bordeaux, which owns a shopping center
in Oklahoma City, Oklahoma; (2) 100% of the stock of Bordeaux Investments One,
Inc., which owns 6.5 acres of undeveloped land in Oklahoma City, Oklahoma; and
(3) the personal guarantees of the Bordeaux partners.  The loan bears interest
at 14.0% per annum.  Until November 1998, the loan required monthly payments of
interest only at the rate of 12.0% per annum, with the deferred interest payable
at maturity in January 1999.  In November 1998, the loan was modified to allow
payments based on monthly cash flow of the collateral property and the maturity
date was extended to December 1999.  In the second quarter of 1999, the loan was
modified increasing the loan commitment to $2.1 million and the Partnership
funded an additional $33,000.  In July 1999, the Partnership funded an
additional $93,000. The property has had no cash flow, therefore, the
Partnership ceased accruing interest in the second quarter of 1999.

In June 1998, the Partnership funded a $365,000 loan to RB Land & Cattle, L.L.C.
The loan is secured by a pledge of a note secured by 7,200 acres of undeveloped
land near Crowell, Texas, and the personal guarantee of the borrower.  The loan
bore interest at 10.0% per annum

                                       10
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 3.   NOTES AND INTEREST RECEIVABLE (Continued)

and matured in December 1998.  All principal and interest were due at maturity.
The borrower did not make the required payments and the loan was classified as
nonperforming.  The Partnership has begun foreclosure proceedings.  The
Partnership expects to incur no loss on foreclosure as the fair value of the
collateral property, less estimated costs of sale, exceeds the carrying value of
the note.

In August 1998, the Partnership funded a $6.0 million loan to Centura Holdings,
LLC, a subsidiary of Centura Tower, Ltd.  The loan is secured by 6.4 acres of
land in Farmers Branch, Texas.  The loan bears interest at 15.0% per annum and
matures in August 2000.  All principal and interest are due at maturity.  In
February 1999, the Partnership funded an additional $37,500.

Also in August 1998, the Partnership funded a $3.7 million loan to JNC
Enterprises, Inc. ("JNC").  The loan was secured by a contract to purchase 387
acres of land in Collin County, Texas, the guaranty of the borrower and the
personal guarantees of its partners.  The loan bore interest at 12.0% per annum
and matured the earlier of termination of the purchase contract or February
1999.  All principal and interest were due at maturity.  This loan was cross-
collateralized with other JNC loans.  In January 1999, ART purchased the
contract from JNC and acquired the land.  In connection with the purchase,
Garden Capital, L.P. ("GCLP") funded an additional $6.0 million of its $95.0
million loan commitment to ART.  GCLP is a partnership in which NOLP is the sole
limited partner with a 99.3% limited partner interest and a wholly-owned
subsidiary of ART is the general partner with .7% general partner interest.  A
portion of the funds were used to payoff the $3.7 million loan, including
accrued but unpaid interest, a $1.3 million paydown of the JNC line of credit
and a $820,000 paydown of the JNC Frisco Panther Partners, Ltd. loan, discussed
below.  See NOTE 7. "NOTES PAYABLE."

Further in August 1998, the Partnership funded a $635,000 loan to La Quinta
Partners, LLC.  The loan is secured by interest bearing accounts prior to being
used as escrow deposits toward the purchase of a total of 956 acres of land in
La Quinta, California.  The loan bore interest at 10.0% per annum and matured in
November 1998.  All principal and interest were due at maturity.  In November
and December 1998, the Partnership received $250,000 in principal paydowns.  In
the second quarter of 1999, the loan was modified, increasing the interest rate
to 15.0% per annum and extending the maturity date to November 1999. Accrued but
unpaid interest was added to the principal balances increasing it to $401,000 at
June 30, 1999.

In 1997 and 1998, the Partnership funded a $3.8 million loan to Stratford &
Graham Developers, L.L.C.  The loan is secured by 1,485 acres of unimproved land
in Riverside County, California.  In the first six months of 1999, the
Partnership funded an additional $305,000, increasing the loan balance to $4.1
million.  The loan bears interest at 15.0% per annum and matured in June 1999.
All principal and interest

                                       11
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 3.   NOTES AND INTEREST RECEIVABLE (Continued)

were due at maturity.  The borrower did not make the required principal and
interest payments and the loan was classified as nonperforming at June 30, 1999.
The Partnership has begun foreclosure proceedings.  The Partnership expects to
incur no loss on foreclosure as the fair value of the collateral property, less
estimated costs of sale, exceeds the carrying value of the note.

In October 1998, the Partnership funded three loans to JNC or affiliated
entities.  The first JNC loan of $1.0 million was secured by a second lien on
3.5 acres of land in Dallas, Texas, the guaranty of the borrower and the
personal guarantees of its partners.  The loan bore interest at 14.0% per annum
and matured in October 1999.  All principal and interest were due at maturity.
This loan was paid in full in July 1999.  The second loan, also $1.0 million,
was secured by a second lien on 2.9 acres of land in Dallas, Texas, the guaranty
of the borrower and the personal guarantees of its partners.  The loan bore
interest at 14.0% per annum and matured in October 1999.  All principal and
interest were due at maturity.  This loan was paid in full in March 1999.  The
third loan, in the amount of $2.1 million was to Frisco Panther Partners, Ltd.
The loan is secured by a second lien on 408.2 acres of land in Frisco, Texas,
the guaranty of the borrower and the personal guarantees of its partners.  The
loan bears interest at 14.0% per annum and matures in October 1999.  All
principal and interest are due at maturity.  This loan is cross-collateralized
with other JNC loans funded by the Partnership.  In January 1999, the
Partnership received a paydown of $820,000 on the Frisco Panther Partners, Ltd.
loan.

In March 1998, the Partnership ceased receiving the required payments on a $3.0
million note receivable secured by an office building in Dallas, Texas.  In
October 1998, the Partnership began foreclosure proceedings. In March 1999, the
Partnership received payment in full, including accrued but unpaid interest.

In December 1998, the Partnership funded $3.3 million of a $5.0 million loan
commitment to JNC.  The loan is secured by a second lien on 1,791 acres of land
in Denton County, Texas, and a second lien on 220 acres of land in Tarrant
County, Texas.  The loan bears interest at 12.0% per annum and matures in
December 1999.  All principal and interest are due at maturity.  The loan is
cross-collateralized with other JNC loans funded by the Partnership.  In January
1999, the Partnership received a $1.3 million paydown.  In first half of 1999,
the Partnership funded an additional $3.0 million.

At December 1998, the Partnership's one wraparound mortgage note receivable was
in default.  The Partnership has been vigorously pursuing its rights under the
loan agreement.  If the Partnership should be unsuccessful, and the underlying
lien holder forecloses the collateral property, the Partnership will incur no
loss in excess of previously established reserves.

                                       12
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 3.   NOTES AND INTEREST RECEIVABLE (Continued)

In April 1999, ART funded a $2.0 million loan commitment to Lordstown, L.P.  The
loan is secured by a second lien on land in Ohio and Florida and by 100% of the
general and limited partner interest in Partners Capital, Ltd. and a 50% profits
interest in subsequent land sales.

Also in April 1999, ART funded $1.8 million of a $2.4 million loan commitment to
261, L.P.  The loan is secured by 100% of the general and limited partner
interest in Partners Capital, Ltd. and a profits interest in subsequent land
sales.

Related Party.  In February 1999, GCLP funded a $5.0 million unsecured loan to
Davister Corp., which at July 31, 1999, owned approximately 15.8% of the
outstanding shares of the Company's Common Stock.  The loan bears interest at
12.0% per annum and matures in February 2000.  All principal and interest are
due at maturity.  The loan is guaranteed by Basic Capital Management, Inc.
("BCM"), ART's advisor.


NOTE 4.   REAL ESTATE

In January 1999, GCLP sold the 199 unit Olde Town Apartments in Middleton, Ohio,
for $4.6 million, receiving net cash of $4.4 million after the payment of
various closing costs, including a real estate brokerage commission of $136,000
to Carmel Realty, Inc. ("Carmel Realty"), an affiliate of BCM, the Company's
advisor.  A gain of $2.2 million was recognized on the sale.

In February 1999, ART purchased Frisco Bridges land, a 336.8 acre parcel of
unimproved land in Collin County, Texas, for $46.8 million, paying $7.8 million
in cash and obtained mortgage financing totaling $39.0 million.  Seller
financing in the amount of $22.0 million, secured by 191.5 acres of the parcel,
bears interest at prime plus 2.0%, currently 9.75% per annum, requires monthly
interest only payments and matures in January 2000.  A mortgage in the amount of
$15.0 million, secured by 125.0 acres of the parcel, bears interest at the prime
rate plus 4.5%, currently 12.25% per annum, required principal reduction
payments of $1.0 million on each of May 1, June 1, and July 1, and requires
principal reduction payments of $1.0 million on each of August 1, September 1
and October 1, and $3.0 million on November 1, 1999 in addition to monthly
interest payments and matures in February 2000. Another mortgage in the amount
of $2.0 million, secured by 13.5 acres of the parcel, bears interest at 14% per
annum, requires monthly interest only payments and matures in January 2000.
ART's Double O land in Las Colinas, Texas and its Desert Wells land in Palm
Desert, California, are pledged as additional collateral for these loans.  ART
drew down $6.0 million under its line of credit with the GCLP for a portion of
the cash requirement.  See  NOTE 7. "NOTES PAYABLE."  A real estate brokerage
commission of $1.4 million was paid to Carmel Realty.

Also in February 1999, ART sold a 4.6 acre tract of its Plano Parkway land
parcel for $1.2 million.  ART received net cash of $1.1 million

                                       13
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 4.   REAL ESTATE (Continued)

after the payment of various closing costs, including a real estate brokerage
commission of $36,000 to Carmel Realty.  Simultaneously with the sale, the
mortgage debt secured by such land parcel was refinanced in the amount of $7.1
million.  The new mortgage bears interest at the prime rate plus 4.5%, currently
12.25% per annum, requires monthly interest only payments and matures in January
2000.  The net cash from the sale and refinancing along with an additional
$921,000 was used to payoff the $8.9 million seller financing secured by the
land parcel.  A mortgage brokerage and equity refinancing fee of $71,000 was
paid to BCM.  A gain of $473,000 was recognized on the sale.

In February 1999, GCLP sold the 225 unit Santa Fe Apartments in Kansas City,
Missouri, for $4.6 million, receiving net cash of $4.3 million after the payment
of various closing costs, including a real estate brokerage commission of
$137,000 to Carmel Realty.  A gain of $706,000 was recognized on the sale.

Also in February 1999, GCLP sold the 480 unit Mesa Ridge Apartments in Mesa,
Arizona, for $19.5 million, receiving net cash of $793,000 after the payment of
various closing costs, including a real estate brokerage commission of $585,000
to Carmel Realty and remitting $17.8 million to the lender to hold in escrow
pending a substitution of collateral.  In May 1999, the 259 unit Bavarian Woods
Apartments and the 149,855 sq. ft. Westwood Shopping Center were approved as
substitute collateral.  GCLP received net cash of $7.8 million after paying off
$7.2 million in mortgage debt secured by the Bavarian Woods Apartments and
Westwood Shopping Center, funding required escrows and closing costs on the two
properties, and paying down $2.2 million on the Mesa Ridge debt, including a
$133,000 prepayment penalty.  A gain of $10.2 million was recognized on the
sale.

In March 1999, ART sold a 13.0 acre tract of its Rasor land parcel for $1.6
million, receiving no net cash after paying down by $1.5 million the mortgage
debt secured by such land parcel and the payment of various closing costs,
including a real estate brokerage commission of $48,000 to Carmel Realty.  A
gain of $979,000 was recognized on the sale.

Also in March 1999, ART sold two tracts totaling 9.9 acres of its Mason/Goodrich
land parcel for $956,000, receiving net cash of $33,000 after paying down by
$860,000 the mortgage debt secured by such land parcel and the payment of
various closing costs, including a real estate brokerage commission of $29,000
to Carmel Realty.  A gain of $432,000 was recognized on the sale.

Further in March 1999, ART sold, in a single transaction, a 13.7 acre tract of
its McKinney II land parcel and a 20.0 acre tract of its McKinney IV land parcel
for $7.7 million, receiving no net cash after paying down by $5.5 million the
mortgage secured by such land parcel, the funding of required escrows and the
payment of various closing costs, including a real estate brokerage commission
of $231,000 to Carmel Realty.  A gain of $2.9 million was recognized on the
sale.

                                       14
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 4.   REAL ESTATE (Continued)

In April 1999, GCLP sold the 166 unit Horizon East Apartments in Dallas, Texas,
for $4.0 million, receiving net cash of $1.2 million after paying off $2.6
million in mortgage debt and the payment of various closing costs, including a
real estate brokerage commission of $79,000 to Carmel Realty.  A gain of $1.8
million was recognized on the sale.

Also in April 1999, GCLP sold the 120 unit Lantern Ridge Apartments in Richmond,
Virginia, for $3.4 million, receiving net cash of $880,000 after the payment of
various closing costs, including a real estate brokerage commission of $103,000
to Carmel Realty.  The purchaser assumed the $2.4 million mortgage secured by
the property.  A gain of $2.3 million was recognized on the sale.

In May 1999, ART sold a 15.0 acre tract of its Vista Ridge land parcel for $2.6
million, receiving net cash of $552,000 after paying down by $1.8 million the
mortgage secured by such land parcel and the payment of various closing costs,
including a real estate brokerage commission of $79,000 to Carmel Realty.  A
gain of $913,000 was recognized on the sale.

Also in May 1999, ART purchased Rowlett Creek land, a 80.4 acre parcel of
unimproved land in Collin County, Texas, for $1.6 million.  ART paid $400,000 in
cash and obtained seller financing of the remaining $1.2 million of the purchase
price.  The seller financing bears interest at 8.75% per annum, requires
quarterly interest only payments and matures in May 2004.  A real estate
brokerage commission of $94,000 was paid to Carmel Realty.

Further in May 1999, ART purchased Leone land, a 8.2 acre parcel of unimproved
land in Irving, Texas, for $1.5 million.  ART paid $300,000 in cash and obtained
seller financing of the remaining $1.2 million of the purchase price.  The
seller financing bears interest at 8.0% per annum, requires quarterly interest
only payments, and matures in May 2003.  A real estate brokerage commission of
$91,000 was paid to Carmel Realty.

In May 1999, a newly-formed controlled partnership in which a wholly-owned
subsidiary of ART is the 1.0% managing general partner and ART is the 99% Class
B limited partner, purchased the 177,211 sq. ft. Encino Executive Plaza in Los
Angeles, California, for $40.1 million.  The partnership paid $2.8 million in
cash, assumed $34.6 million in mortgage debt, obtained $1.1 million in seller
financing and issued 1.6 million Class A limited partner units.  The mortgage
bears interest at 7.74% per annum, requires monthly payments of principal and
interest of $247,500 and matures in May 2008.  The seller financing bears
interest at 7.0% per annum, requires interest only payments semiannually in July
and January, requires principal payments of $369,000 in May 2000 and May 2001
and matures in May 2002.  The Class A units accrue a preferred return of $.05
per annum per Class A unit for the first year, $.06 per annum per Class A unit
for the second year, $.07 per annum per Class A unit for the third year and
$2.09 per annum per Class A unit thereafter, paid quarterly.

                                       15
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 4.   REAL ESTATE (Continued)

Also in May 1999, ART sold two tracts of its Plano Parkway land parcel totaling
24.5 acres for $4.9 million.  ART received no net cash after paying down by $4.7
million the mortgage debt secured by such land parcel and the payment of various
closing costs, including a real estate brokerage commission of $147,000 to
Carmel Realty.  A gain of $1.1 million was recognized on the sale.

In May 1999, ART acquired the remaining joint venture interest in its 3.6 acre
Atlanta land parcel for $1.3 million in cash.  Subsequently, ART exchanged the
Atlanta land parcel for 147.4 acres of land in Nashville, Tennessee and $1.3
million in cash.  No gain or loss was recognized on the exchange.

Also in May 1999, the Partnership purchased the 27,000 sq. ft. Cooley Office
Building in Farmers Branch, Texas, for $3.5 million, paying $1.5 million in cash
and obtained mortgage financing of $2.0 million.  The mortgage bears interest at
a variable rate, currently 8.75% per annum, requires monthly payments of
principal and interest of $17,875 and matures in May 2019.  A real estate
brokerage commission of $35,000 was paid to Carmel Realty.

In June 1999, ART sold two tracts of its Frisco Bridges land parcel totaling
77.6 acres for $16.9 million.  ART received net cash of $2.7 million after
paying off $2.0 million in mortgage debt secured by such land parcel, paying
down by $11.0 million another mortgage secured by such land parcel and the
payment of various closing costs, including a real estate brokerage commission
of $507,000 to Carmel Realty.  A gain of $4.2 million was recognized on the
sale.

Also in June 1999, ART sold a 6.0 acre tract of its Plano Parkway land parcel
for $1.6 million.  ART received no net cash after paying down by $1.6 million
the mortgage debt secured by such land parcel and the payment of various closing
costs, including a real estate brokerage commission of $47,000 to Carmel Realty.
A gain of $615,000 was recognized on the sale.

Further in June 1999, ART sold its Continental Hotel for $25.0 million,
receiving a nonrefundable deposit of $5.0 million and providing short term
financing of $20.0 million.  A gain of $7.9 million was recognized on the sale.

In June 1999, ART purchased Vineyards II land, a 18.6 acre parcel of unimproved
land in Tarrant County, Texas, for $6.3 million.  ART paid $2.3 million in cash
and obtained seller financing of the remaining $4.0 million of the purchase
price.  The seller financing bears interest at 14.5% per annum, requires monthly
interest only payments and matures in June 2002.  A real estate brokerage
commission of $190,000 was paid to Carmel Realty.

                                       16
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 4.   REAL ESTATE (Continued)

Also in June 1999, the Partnership purchased the Lake Houston land, 33.58 acres
of unimproved land in Harris County, Texas, for $2.5 million in cash.  A real
estate brokerage commission of $75,000 was paid to Carmel Realty.  The
Partnership has obtained a construction financing commitment in the amount of
$13.7 million, to construct a 312 unit apartment complex on the site.
Construction costs are expected to approximate $16.7 million.  Construction was
begun in July 1999, and is expected to be completed in the second quarter of
2001.

Further in June 1999, GCLP sold the 368 unit Barcelona Apartments in Tampa,
Florida, for $9.8 million, receiving net cash of $2.2 million after paying off
$7.0 million in mortgage debt and the payment of various closing costs,
including a real estate brokerage commission of $79,000 to Carmel Realty.  A
gain of $2.2 million was recognized on the sale.

In November 1998, a newly-formed controlled partnership with ART as the Class B
limited partner and a wholly-owned subsidiary of ART as the 1% Managing General
Partner, purchased two apartments with a total of 423 units in Indianapolis,
Indiana, for $7.2 million, paying $14,000 in cash, assuming $5.9 million in
mortgage debt and issuing $1.3 million in Class A limited partner units.  In
June 1999, ART relinquished it's general and Class B limited partner interests.
A provision for loss of $2.0 million was recognized.


NOTE 5.   INVESTMENT IN EQUITY INVESTEES

Real estate entities.  The Company's investment in equity investees at June 30,
1999, included equity securities of three publicly traded Real Estate Investment
Trusts (collectively the "REITs"), Continental Mortgage and Equity Trust
("CMET"), Income Opportunity Realty Investors, Inc. ("IORI") and
Transcontinental Realty Investors, Inc. ("TCI"), and interests in real estate
joint ventures and partnerships.  BCM, the Company's advisor, also serves as
advisor to the REITs.

The Company accounts for its investment in the REITs and the joint venture
partnerships using the equity method.  Substantially all of the equity
securities of the REITs are pledged as collateral for borrowings. See NOTE 8.
"MARGIN BORROWINGS."

                                       17
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 5.   INVESTMENT IN EQUITY INVESTEES (Continued)

The Company's investment in real estate entities, accounted for using the equity
method, at June 30, 1999, was as follows:

<TABLE>
<CAPTION>
                                            Equivalent
              Percentage      Carrying       Investee
                  of          Value of      Book Value      Market Value
             Ownership at   Investment at       at        of Investment at
Investee    June 30, 1999   June 30, 1999  June 30, 1999   June 30, 1999
--------    -------------   -------------  -------------  ----------------
<S>         <C>             <C>            <C>            <C>
CMET              41.0%         $16,350        $36,407          $24,661
IORI              30.4            3,054          7,033            2,904
TCI               31.0           11,608         30,366           14,905
                                -------                         -------
                                 31,012                         $42,470
                                                                =======
Other                             6,312
                                -------
                                $37,324
                                =======
</TABLE>

The difference between the carrying value of the Company's investment and the
equivalent investee book value is being amortized over the life of the
properties held by each investee.

Management continues to believe that the market value of each of the REITs
undervalues their assets and the Company may, therefore, continue to increase
its ownership in these entities in 1999.

Set forth below is summarized results of operations of equity investees for the
six months ended June 30, 1999:

<TABLE>
<S>                                             <C>
  Revenues....................................................  $81,122
  Equity in income of partnerships............................      912
  Property operating expenses.................................   49,623
  Depreciation................................................   11,251
  Interest expense............................................   25,985
                                                                -------
  (Loss) before gains on sale of real estate..................   (4,825)

  Gains on sale of real estate................................   15,834
                                                                -------
  Net income..................................................  $11,009
                                                                =======
</TABLE>

The Company's share of equity investees' loss before gains on the sale of real
estate was $1.5 million for the six months ended June 30, 1999, and its share of
equity investees' gains on sale of real estate was $4.9 million for the six
months ended June 30, 1999.

The Company's cash flow from the REITs is dependent on the ability of each of
them to make distributions.  In the fist six months of 1999, distributions
totaling $849,000 were received from the REITs.

In the first six months of 1999, ART purchased a total of $35,000 of equity
securities of the REITs.

                                       18
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 6.   MARKETABLE EQUITY SECURITIES - TRADING PORTFOLIO

Since 1994, the Company has been purchasing equity securities of entities other
than those of the REITs and the NRLP to diversify and increase the liquidity of
its margin accounts.  In the first six months of 1999, the Company purchased
$1.2 million and sold $1.5 million of such securities.  These equity securities
are considered  a trading portfolio and are carried at market value.  At June
30, 1999, the Company recognized an unrealized decrease in the market value of
its trading portfolio securities of $1.9 million.  Also in the first six months
of 1999, the Company realized a net gain of $69,000 from the sale of trading
portfolio securities and received $9,000 in dividends. Unrealized and realized
gains and losses on trading portfolio securities are included in other income in
the accompanying Consolidated Statements of Operations.


NOTE 7.   NOTES PAYABLE

In February 1999, the Partnership obtained mortgage financing secured by the
unencumbered 124,200 sq. ft. Melrose Business Park in Oklahoma City, Oklahoma,
in the amount of $900,000, receiving net cash of $870,000 after the payment of
various closing costs, including a mortgage brokerage and equity refinancing fee
of $9,000 to BCM.  The mortgage bears interest at a variable rate, currently
8.5% per annum, requires monthly payments of principal and interest of $8,000
and matures in February 2019.

Also in February 1999, the Partnership obtained mortgage financing secured by
the unencumbered 54,649 sq. ft. 56 Expressway Office Building in Oklahoma City,
Oklahoma, in the amount of $1.7 million, receiving net cash of $1.7 million
after the payment of various closing costs, including a mortgage brokerage and
equity refinancing fee of $17,000 to BCM.  The mortgage bears interest at a
variable rate, currently 8.5% per annum, requires monthly payments of principal
and interest of $15,000 and matures in February 2019.

In March 1999, ART obtained a second mortgage financing on its Frisco Bridges
land parcel in the amount of $2.0 million.  In June 1999, the lender advanced an
additional $2.0 million.  The mortgage bears interest at 12.5% per annum and
requires interest and principal to be paid at maturity in June 1999.

Also in March 1999, the Las Colinas I term loan lender provided additional
financing on ART's Stagliano, Dalho, Bonneau and Valley Ranch III land parcels
in the amount of $2.2 million.  The proceeds from this financing along with an
additional $1.4 million in cash were used to pay off the $3.1 million in
mortgage debt secured by such land parcels.  A mortgage brokerage and equity
refinancing fee of $22,000 was paid to BCM.

At March 31, 1999, the mortgage debt secured by ART's McKinney I, II, III, IV, V
and Dowdy land parcels in the amount of $15.2 million

                                       19
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 7.   NOTES PAYABLE (Continued)

matured.  ART and the lender reached an agreement to extend the mortgage's
maturity to September 1999 in exchange for, among other things, ART's payment of
an extension fee.

In May 1999, the Partnership obtained mortgage financing secured by the
unencumbered 257 unit Pines Apartments in Little Rock, Arkansas, and by a $5.0
million note receivable secured by second liens on two parcels of land in Denton
County and Tarrant County, Texas, in the amount of $4.0 million.  The
Partnership received net cash of $3.9 million after the payment of various
closing costs, including a mortgage brokerage and equity refinancing fee of
$40,000 to BCM.  The mortgage bears interest at 14.0% per annum, requires
monthly payments of interest only and matures in May 2000.

Also in May 1999, the Las Colinas I term loan lender provided additional
financing secured by ART's Plano Parkway land parcel in the amount of $2.0
million.  The proceeds from this financing along with an additional $831,000 in
cash were used to payoff the remaining $2.7 million in mortgage debt secured by
such land parcel and the payment of various closing costs.

In June 1999, the Partnership obtained mortgage financing secured by the
unencumbered 100 unit Stonebridge Apartments in Florissant, Missouri, in the
amount of $3.0 million.  The Partnership received net cash of $2.9 million after
the payment of various closing costs, including a mortgage brokerage and equity
refinancing fee of $30,000 to BCM.  The mortgage bears interest at 8.33% per
annum, requires monthly payments of principal and interest of $23,814 and
matures in July 2002.

Related Party. In 1998 and the first six months of 1999, GCLP funded $92.2
million of a $95.0 million loan commitment to ART. The loan is secured by (1)
second liens on an office building in Minnesota, four apartments in Mississippi,
and 130.54 acres of land in Texas, (2) by the stock of ART Holdings, Inc., a
wholly-owned subsidiary of ART that owns 3,308,535 units of NRLP, and (3) by the
stock of NMC. The loan bears interest at 12.0% per annum, requires monthly
payments of interest only and matures in November 2003. In February 1999, ART
made a $999,000 paydown on the loan. In July 1999, GCLP funded an additional
$2.5 million. The loan balance is eliminated in consolidation.

In December 1998, in connection with the Litigation Settlement, NMC, the general
partner of the Partnership, assumed responsibility for repayment to the
Partnership of the $12.4 million paid by the Partnership to the Moorman
Litigation plaintiff class members and legal counsel; $184,000 of such amount
being paid in March 1999.  The loan bears interest at 90 day LIBOR (London
InterBank Offered Rate) plus 2.0% per annum, currently 7.0% per annum, adjusted
every 90 days and requires annual payments of  accrued interest plus principal
payments of $500,000 in each of the first three years, $750,000 in each of the
next three years, $1.0

                                       20
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 7.   NOTES PAYABLE (Continued)

million in each of the next three years, with payment in full of the remaining
balance in the tenth year.  The note is guaranteed by ART. The note matures upon
the earlier of the liquidation or dissolution of the Partnership, NMC ceasing to
be general partner or ten years from March 24, 1999, the date of the first cash
distribution to the Moorman Litigation plaintiff class members.  The loan
balance is eliminated in consolidation.


NOTE 8.   MARGIN BORROWINGS

The Company has margin arrangements with various brokerage firms which provide
for borrowing of up to 50% of the market value of the Company's marketable
equity securities.  The borrowings under such margin arrangements are secured by
equity securities of the REITs, NRLP and the Company's trading portfolio and
bear interest rates ranging from 7.0% to 11.0%.  Margin borrowing totaled $35.6
million at June 30, 1999.

In August 1996, the Company consolidated its existing NRLP margin debt held by
various brokerage firms into a single loan.  At December 1998, the loan had a
principal balance of $5.0 million.  In February 1999, the loan was paid off.


NOTE 9.   INCOME TAXES

Financial statement income varies from taxable income principally due to the
accounting for income and losses of investees, gains and losses from asset
sales, depreciation on owned properties, amortization of discounts on notes
receivable and payable and the difference in the allowance for estimated losses.
The Company had no taxable income or provision for income taxes in the six
months ended June 30, 1999, due to operating loss carryforwards.


NOTE 10.  OPERATING SEGMENTS

Significant differences among the accounting policies of the Company's operating
segments as compared to the Company's consolidated financial statements
principally involve the calculation and allocation of administrative expenses.
Management evaluates the performance of the operating segments and allocates
resources to each of them based on their operating income and cash flow.  A
reconciliation of expenses that are not reflected in the segments is $8.9
million and $4.2 million of administrative expenses for the six months ended
June 30, 1999 and 1998, respectively.  There are no intersegment revenues and
expenses and the Partnership conducts all of its business within the United
States.

                                       21
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 10.  OPERATING SEGMENTS (Continued)

Presented below is the operating income of the reportable operating segments for
the six months ended June 30, and segment assets at June 30.

<TABLE>
<CAPTION>
                   Commercial                                  Pizza
      1999         Properties  Apartments  Hotels     Land    Parlors  Receivables   Total
-----------------  ----------  ----------  -------  --------  -------  -----------  --------
<S>                <C>         <C>         <C>      <C>       <C>      <C>          <C>
Operating
 revenue.........    $ 14,241    $ 50,734  $15,661  $  1,229  $14,953  $         -  $ 96,818
Operating
 expenses........       7,450      29,771   11,006     5,174   12,798            -    66,199
Interest
 income..........           -           -        -         -        -        3,698     3,698
Interest
 expense -
 notes
 receivable                 -           -        -         -        -          559       559
                     --------    --------  -------  --------  -------  -----------  --------
Operating
 income
 (loss)..........    $  6,791    $ 20,963  $ 4,655  $(3,945)  $ 2,155  $     3,139  $ 33,758
                     ========    ========  =======  ========  =======  ===========  ========

Depreciation/
 amorti-
 zation..........    $  1,954    $  5,122  $ 1,272  $      -  $   652  $        -   $  9,000
Interest on
 debt............       3,804      14,948    2,433    17,642      488            -    39,315
Capital
 expendi-
 tures...........       8,413       3,246      994       926      127            -    13,706
Assets...........     139,671     237,331   72,236   319,776   21,514       92,200   882,728

<CAPTION>
Property Sales:                Apartments   Hotels    Land                            Total
                               ----------  -------  --------                        --------

Sales price......                $ 45,800  $25,000  $ 44,724                        $115,524
Cost of sales....                  26,340   17,122    33,345                          76,807
                                 --------  -------  --------                        --------

Gain on sales....                $ 19,460  $ 7,878  $ 11,379                        $ 38,717
                                 ========  =======  ========                        ========
</TABLE>

                                       22
<PAGE>

                          AMERICAN REALTY TRUST, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 10.  OPERATING SEGMENTS (Continued)

<TABLE>
<CAPTION>
                         Commercial                                  Pizza
         1998            Properties  Apartments  Hotels     Land    Parlors  Receivables   Total
-----------------------  ----------  ----------  -------  --------  -------  -----------  --------
<S>                      <C>         <C>         <C>      <C>       <C>      <C>          <C>
Operating
 revenue...............     $ 8,060     $ 3,537  $15,395  $    316  $14,085  $         -  $ 41,393
Operating
 expenses..............       4,879       2,984   11,640     1,701   12,005            -    33,209
Interest
 income................           -           -        -         -        -          154       154
Interest
 expense -
 notes
 receivable............           -           -        -         -        -            -         -
                            -------     -------  -------  --------  -------  -----------  --------
Operating
 income
 (loss)................     $ 3,181     $   553  $ 3,755  $(1,385)  $ 2,080  $       154  $  8,338
                            =======     =======  =======  ========  =======  ===========  ========
Depreciation/
 amorti-
 zation................     $   695     $   613  $ 1,145  $      -  $   504  $         -  $   2,957
Interest on
 debt..................       2,247       1,932    3,070    10,535      136            -    17,920
Capital
 expendi-
 tures.................       3,827           -      870         -      110            -     4,807
Assets.................      53,507      69,589   89,918   185,354    9,758       52,053   460,179

                                                            Land                            Total
                                                          --------                        --------
Sales price............                                   $ 36,600                        $ 36,600
Cost of sales..........                                     27,626                          27,626
                                                          --------                        --------
Gain on sale...........                                    $ 8,974                        $  8,974
                                                          ========                        ========
</TABLE>


NOTE 11.  COMMITMENTS AND CONTINGENCIES

In 1996, ART was admitted to the Valley Ranch, L.P. partnership as general
partner and Class B limited partner.  The existing general and limited partners
converted their general and limited partner interests into 8,000,000 Class A
limited partner units.  The units are exchangeable into shares of the Company's
Series E Cumulative Convertible Preferred Stock at the rate of 100 Class A units
for each share of Series E Preferred Stock.  In February 1999, the Class A
limited partners notified the Company that it intended to convert 100,000 Class
A units into 1,000 shares of Series E Preferred Stock.  In March 1999, ART
purchased the 100,000 Class A units for $100,000.  ART subsequently reached an
agreement with the other Class A limited partners to acquire the remaining
7,900,000 Class A units for $1.00 per unit.  In April 1999, 900,000 units were
purchased and an additional 1.0 million units were purchased in July 1999, and
1.0 million units will be purchased in October 1999 and January 2000 and 2.0
million units in May 2001 and May 2002.

Litigation.  The Company is involved in various lawsuits arising in the ordinary
course of business.  In the opinion management, the outcome of these lawsuits
will not have a material impact on the Company's financial condition, results of
operations or liquidity.

                                       23
<PAGE>

                          AMERICAN REALTY TRUST, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 12.  SUBSEQUENT EVENTS

In July 1999, ART sold two tracts totaling 11.8 acres of its Plano Parkway land
parcel for $3.8 million.  ART received net cash of $1.7 million after paying
down its Las Colinas I term loan by $2.0 million and the payment  of various
closing costs, including a real estate brokerage commission of $112,000 to
Carmel Realty.  ART will recognized a gain on the sale.

Also in July 1999, ART sold two tracts totaling 6.7 acres of its Vista Ridge
land parcel for $1.4 million.  ART received net cash of $329,000 after paying
down by $975,000 the mortgage debt secured by such land parcel and the payment
of various closing costs, including a real estate brokerage commission of
$43,000 to Carmel Realty.  ART will recognize a gain on the sale.

Further in July 1999, ART sold a .1 acre tract of its JHL Connell land parcel
for $53,000.  ART received no net cash after paying down by $49,000 the mortgage
debt secured by such land parcel and the payment of various closing costs,
including a real estate brokerage commission of $2,000 to Carmel Realty.  ART
will recognize a gain on the sale.

In July 1999, ART purchased Monterey land, a 85.0 acre parcel of unimproved land
in Riverside County, California, for $5.7 million.  ART paid $1.2 million in
cash and obtained seller financing of the remaining $4.5 million of the purchase
price.  The seller financing bears interest at 9.0% per annum, requires
quarterly interest only payments, principal paydowns of $500,000 each in June
2000 and June 2001 and matures in June 2002.  A real estate brokerage commission
of $337,500 was paid to Carmel Realty.

Also in July 1999, ART purchased Wakefield land, a 70.0 acre parcel of
unimproved land in Allen, Texas, for $1.3 million.  ART paid $700,000 and
obtained seller financing of the remaining $600,000 of the purchase price. The
seller financing bears interest at 8.5% per annum, requires quarterly interest
only payments and matures in July 2004.  A real estate brokerage commission of
$78,000 was paid to Carmel Realty.

Further in July 1999, ART sold a 1.4 acre tract of its Valley Ranch land parcel
for $163,000.  ART received net cash of $150,000 after the payment of various
closing costs, including a real estate brokerage commission of $5,000 to Carmel
Realty.  ART will recognize a gain on the sale.

In July 1999, the Partnership received $1.3 million on the collection of a
mortgage note receivable, including a $400,000 participation fee.

Also in July 1999, the Partnership obtained mortgage financing secured by the
unencumbered 76 unit Bridgestone Apartments in Friendswood, Texas, in the amount
of $2.1 million, receiving net cash of $2.0 million after the payment of various
closing costs, including a mortgage brokerage and equity refinancing fee of
$21,000 to BCM. The mortgage bears interest at 7.72% per annum, requires monthly
payments of principal and interest of $15,144 and matures in August 1999.

                                       24
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS


Introduction

ART was organized in 1961 to provide investors with a professionally managed,
diversified portfolio of equity real estate and mortgage loan investments
selected to provided opportunities for capital appreciation as well as current
income.


Liquidity and Capital Resources

General.  Cash and cash equivalents at June 30, 1999 totaled $6.1 million,
compared with $11.5 million at December 31, 1998.  Although ART anticipates that
during the remainder of 1999 it will generate excess cash flow from property
operations, as discussed below, such excess cash is not sufficient to discharge
all of ART's debt obligations as they mature.  ART will therefore continue to
rely on externally generated funds, including borrowings against its investments
in various real estate entities, the sale or refinancing of properties and, to
the extent available or necessary, borrowings from its advisor and affiliates,
which totaled $27.2 million at June 30, 1999, to meet its debt service
obligations, pay taxes, interest and other non-property related expenses.

At December 31, 1998, notes payable totaling $164.2 million had either scheduled
maturities or required principal reduction payments during 1999. During the
first six months of 1999, ART either extended, refinanced, paid down, paid off
or received commitments from lenders to extend or refinance $55.3 million of the
debt scheduled to mature in 1999.

Net cash used in operating activities decreased to $6.5 million in the six
months ended June 30, 1999, from $9.1 million in the six months ended June 30,
1998.  Fluctuations in the components of cash flow used in operating activities
are discussed in the following paragraphs.

Net cash from pizza operations (sales less cost of sales) in the six months
ended June 30, 1999, increased to $2.8 million from $248,000 in 1998.  The
increase was due to the benefits of a more aggressive marketing and advertising
strategy offset in part by record high cheese prices in January 1999.

Net cash from property operations (rents collected less payments for expenses
applicable to rental income) increased to $34.0 million in the six months ended
June 30, 1999 from $5.1 million in 1998. The increases were primarily
attributable to the 16 land parcels and 36 apartments purchased by ART in 1998
and the consolidation of the Partnership effective January 1, 1999. See NOTE 2.
"SYNTEK ASSET MANAGEMENT, L.P."

The Company expects an increase in cash flow from property operations during the
remainder of 1999. Such increase is expected to be derived from a full year of
operations of the 36 apartments that were acquired during 1998 and the
consolidation of the Partnership effective January 1, 1999. ART is also
expecting substantial land sales and selected property sales to generate
additional cash.

                                       25
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Liquidity and Capital Resources (Continued)

Interest collected increased to $1.0 million in the six months ended June 30,
1999, from $381,000 in 1998.  The increase was attributable to loans funded by
the Partnership in 1998 and 1999.

Interest paid increased to $39.0 million in the six months ended June 30, 1999,
from $16.5 million in 1998.  The increase was primarily due to debt incurred or
assumed relating to 16 land parcels and 36 apartments purchased by ART in 1998
and the consolidation of the Partnership's operations effective January 1, 1999.

Advisory fee paid increased to $2.5 million in the six months ended June 30,
1999, from $1.7 million in 1998.  The increase was due to an increase in ART's
gross assets, the basis for such fee.

General and administrative expenses paid increased to $8.9 million in the six
months ended June 30, 1999, from $4.2 million in 1998.  The increase was
primarily attributable to the consolidation of the Partnership's operations
effective January 1, 1999.

Distributions from equity investees' decreased to $849,000 in the six months
ended June 30, 1999, from $8.5 million in 1998.  Included in 1998 distributions
were special distributions totaling $6.1 million from TCI and the Partnership
that had been accrued at December 31, 1997.

Other cash from operating activities increased to $5.3 million in the six months
ended June 30, 1999, from a use of $861,000 in 1998.  The increase was due to a
decrease in property prepaids, other miscellaneous property receivables and
property escrows.

Real Estate.  In January 1999, GCLP sold the 199 unit Olde Town Apartments in
Middleton, Ohio, for $4.6 million, receiving net cash of $4.4 million after the
payment of various closing costs.

In February 1999, ART purchased Frisco Bridges land, a 336.8 acre parcel of
unimproved land in Collin County, Texas, for $46.8 million, paying $7.8 million
in cash and obtained mortgage and seller financing totaling $39.0 million.

Also in February 1999, ART sold a 4.6 acre tract of its Plano Parkway land
parcel for $1.2 million.  Simultaneously with the sale, the mortgage debt
secured by such land parcel was refinanced in the amount of $7.1 million. The
net cash from the sale and refinancing along with an additional $921,000 was
used to payoff the $8.9 million seller financing secured by the land parcel.

Further in February 1999, GCLP sold the 225 unit Santa Fe Apartments in Kansas
City, Missouri, for $4.6 million, receiving net cash of $4.3 million after the
payment of various closing costs.

In February 1999, GCLP sold the 480 unit Mesa Ridge Apartments in Mesa, Arizona,
for $19.5 million, receiving net cash of $793,000 after the

                                       26
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Liquidity and Capital Resources (Continued)

payment of various closing costs and remitting $17.8 million to the lender to
hold in escrow pending substitution collateral.  In May 1999, the 259 unit
Bavarian Woods Apartments and the 149,855 sq. ft. Westwood Shopping Center were
approved as substitute collateral.  GCLP received net cash of $7.8 million after
paying off $7.2 million in mortgage debt secured by the Bavarian Woods
Apartments and Westwood Shopping Center, funding required escrows and closing
costs on the two properties, and paying down $2.2 million on the Mesa Ridge
debt, including a $133,000 prepayment penalty.

In March 1999, ART sold a 13.0 acre tract of its Rasor land parcel for $1.6
million, receiving no net cash after paying down by $1.5 million the mortgage
debt secured by such land parcel and the payment of various closing costs.

Also in March 1999, ART sold two tracts totaling 9.9 acres of its Mason/
Goodrich land parcel for $956,000, receiving net cash of $33,000 after paying
down by $860,000 the mortgage debt secured by such land parcel and the payment
of various closing costs.

Further in March 1999, ART sold in a single transaction, a 13.7 acre tract of
its McKinney II land parcel and a 20.0 acre tract of its McKinney IV land parcel
for  $7.7 million, receiving no net cash after paying down by $5.5 million the
mortgage secured by such land parcel, the funding of required escrows and the
payment of various closing costs.

In April 1999, GCLP sold the 166 unit Horizon East Apartments in Dallas, Texas,
for $4.0 million, receiving net cash of $1.2 million after paying off $2.6
million in mortgage debt and the payment of various closing costs.

Also in April 1999, GCLP sold the 120 unit Lantern Ridge Apartments in Richmond,
Virginia, for $3.4 million, receiving net cash of $880,000 after the payment of
various closing costs.

In May 1999, ART sold a 15.0 acre tract of its Vista Ridge land parcel for $2.6
million, receiving net cash of $552,000 after paying down by $1.8 million the
mortgage secured by such land parcel and the payment of various closing costs.

Also in May 1999, ART purchased Rowlett Creek land, a 80.4 acre parcel of
unimproved land in Collin County, Texas, for $1.6 million.  ART paid $400,000 in
cash and obtained seller financing of the remaining $1.2 million of the purchase
price.

Further in May 1999, ART purchased Leone land, a 8.2 acre parcel of unimproved
land in Irving, Texas, for $1.5 million.  ART paid $300,000 in cash and obtained
seller financing of the remaining $1.2 million of the purchase price.

In May 1999, a newly-formed controlled partnership in which a wholly-owned
subsidiary of ART is the 1.0% managing general partner and ART is the 99%

                                       27
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Liquidity and Capital Resources (Continued)

Class B limited partner purchased the 177,211 sq. ft. Encino Executive Plaza in
Los Angeles, California, for $40.1 million.  The partnership paid $2.8 million
in cash, assumed $34.6 million in mortgage debt, obtained $1.1 million in seller
financing and issued 1.6 million Class A limited partner units.

Also in May 1999, ART sold two tracts of its Plano Parkway land parcel totaling
24.5 acres for $4.9 million.  ART received no net cash after paying down by $4.7
million the mortgage debt secured by such land parcel and the payment of various
closing costs.

In May 1999, ART acquired the remaining joint venture interest in its 3.6 acre
Atlanta land parcel for $1.3 million in cash.  Subsequently, ART exchanged the
Atlanta land parcel for 147.4 acres of land in Nashville, Tennessee and $1.3
million in cash.

Also in May 1999, the Partnership purchased the 27,000 sq. ft. Cooley Office
Building in Farmers Branch, Texas, for $3.5 million, paying $1.5 million in cash
and obtained mortgage financing of $2.0 million.

In June 1999, ART sold two tracts of its Frisco Bridges land parcel totaling
77.6 acres for $16.9 million.  ART received net cash of $2.7 million after
paying off $2.0 million in mortgage debt secured by such land parcel, paying
down by $11.0 million another mortgage secured by such land parcel and the
payment of various closing costs.

Also in June 1999, ART sold a 6.0 acre tract of its Plano Parkway land parcel
for $1.6 million.  ART received no net cash after paying down by $1.6 million in
mortgage debt secured by such land parcel and the payment of various closing
costs.

Further in June 1999, ART sold its Continental Hotel for $25.0 million,
receiving a nonrefundable deposit of $5.0 million and providing short term
financing of $20.0 million.

In June 1999, ART purchased Vineyards II land, a 18.6 acre parcel of unimproved
land in Tarrant County, Texas, for $6.3 million.  ART paid $2.3 million in cash
and obtained seller financing of the remaining $4.0 million of the purchase
price.

Also in June 1999, the Partnership purchased the Lake Houston land, 33.58 acres
of unimproved land in Harris County, Texas, for $2.5 million in cash.

Further in June 1999, GCLP sold the 368 unit Barcelona Apartments in Tampa,
Florida, for $9.8 million, receiving net cash of $2.2 million after paying off
$7.0 million in mortgage debt and the payment of various closing costs.

                                       28
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Liquidity and Capital Resources (Continued)

In July 1999, ART sold two tracts totaling 11.8 acres of its Plano Parkway land
parcel for $3.8 million.  ART received net cash of $1.7 million after paying
down its Las Colinas I term loan by $2.0 million and the payment of various
closing costs.

Also in July 1999, ART sold two tracts totaling 6.7 acres of its Vista Ridge
land parcel for $1.4 million.  ART received net cash of $329,000 after paying
down by $975,000 the mortgage debt secured by such land parcel and the payment
of various closing costs.

Further in July 1999, ART sold a .1 acre tract of its JHL Connell land parcel
for $53,000.  ART received no net cash after paying down by $49,000 the mortgage
debt secured by such land parcel and the payment of various closing costs.

In July 1999, ART purchased Monterey land, a 85.0 acre parcel of unimproved land
in Riverside County, California, for $5.7 million.  ART paid $1.2 million in
cash and obtained seller financing of the remaining $4.5 million of the purchase
price.

Also in July 1999, ART purchased Wakefield land, a 70.0 acre parcel of
unimproved land in Allen, Texas, for $1.3 million.  ART paid $700,000 in cash
and obtained seller financing of the remaining $600,000 of the purchase price.

Further in July 1999, ART sold a 1.4 acre tract of its Valley Ranch land parcel
for $163,000.  ART received net cash of $150,000 after the payment of various
closing costs.

Notes Receivable.  Principal payments were received totaling $13.2 million in
the six months ended June 30, 1999.

In February 1999, GCLP funded a $5.0 million unsecured loan to Davister Corp.,
which at July 31, 1999, owned approximately 15.8% of the outstanding shares of
the Company's Common Stock.  The loan is guaranteed by BCM, the Company's
advisor.

In 1998, the Partnership funded a $6.0 million loan to Centura Holdings, LLC, a
subsidiary of Centura Tower, Ltd.  The loan is secured by 6.4109 acres of land
in Farmers Branch, Texas.  In February 1999, the Partnership funded an
additional $37,500.

Also in 1998, the Partnership funded a $3.7 million loan to JNC. The loan was
secured by a contract to purchase 387 acres of land in Collin County, Texas, the
guaranty of the borrower and the personal guarantees of its partners. In January
1999, ART purchased the contract from JNC and acquired the land. In connection
with purchase, GCLP funded an additional $6.0 million of its $95.0 million loan
commitment to ART. A portion of the funds were used to payoff the $3.7 million
loan, including accrued but unpaid interest, a $1.3 million paydown of the JNC
line of credit and a $820,000 paydown of the JNC Frisco Panther Partners, Ltd.
loan.

                                       29
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Liquidity and Capital Resources (Continued)

In 1997 and 1998, the Partnership funded a $3.8 million loan to Stratford &
Graham Developers, LLC.  The loan is secured by 1,485 acres of unimproved land
in Riverside County, California.  In the first half of 1999, the Partnership
funded an additional $305,000, increasing the loan balance to $4.1 million.

Also in 1998, the Partnership funded $3.3 million of a $5.0 million loan
commitment to JNC.  The loan is secured by a second lien on 1,791 acres of land
in Denton County, Texas, and a second lien on 220 acres of land in Tarrant
County, Texas.  In January 1999, the Partnership received a $1.3 million paydown
on the loan.  In the first half of 1999, the Partnership funded an additional
$3.0 million.

During 1998 and the first half of 1999, the Partnership funded a total of $26.0
million of a $52.5 million loan commitment to Centura Tower, Ltd. The loan is
secured by a mortgage on 2.244 acres of land and a building under construction
in Farmers Branch, Texas.  In July 1999, the Partnership funded an additional
$4.9 million.

In 1997, 1998 and 1999, the Partnership funded a $1.6 million loan commitment to
Bordeaux.  The loan is secured by (1) a 100% interest in Bordeaux, which owns a
shopping center in Oklahoma City, Oklahoma; (2) 100% of the stock of Bordeaux
Investments One, Inc., which owns approximately 6.5 acres of undeveloped land in
Oklahoma City, Oklahoma; and (3) the personal guarantees of the Bordeaux
partners.  In the second quarter of 1999, the loan was modified increasing the
loan commitment to $2.1 million and the Partnership funded an additional
$33,000.  In July 1999, the Partnership funded an additional $193,000.

In April 1999, ART funded a $2.0 million loan commitment to Lordstown, L.P.  The
loan is secured by a second lien on land in Ohio and Florida and by 100% of the
general and limited partner interest in Partners Capital, Ltd. and a profits
interest in subsequent land sales.

Also in April 1999, ART funded $1.8 million of a $2.4 million loan commitment to
261, L.P.  The loan is secured by 100% of the general and limited partner
interest in Partners Capital, Ltd. and a profits interest in subsequent land
sales.

Notes Payable.  In February 1999, the Partnership obtained mortgage financing
secured by the unencumbered 54,649 sq. ft. 56 Expressway Office Building in
Oklahoma City, Oklahoma, in the amount of $1.7 million.  The Partnership
received net cash of $1.7 million after the payment of various closing costs.

Also in February 1999, the Partnership obtained mortgage financing secured by
the unencumbered 124,200 sq. ft. Melrose Business Park in Oklahoma City,
Oklahoma, in the amount of $900,000. The Partnership received net cash of
$870,000 after the payment of various closing costs.

                                       30
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Liquidity and Capital Resources (Continued)

In March 1999, ART obtained a second mortgage financing on its Frisco Bridges
land in the amount of $2.0 million and an additional $2.0 million in June 1999.

Also in March 1999, the Las Colinas I term loan lender provided additional
financing on ART's Stagliano, Dalho, Bonneau and Valley Ranch III land parcels
in the amount of $2.2 million.  The proceeds from this financing along with an
additional $1.4 million in cash were used to pay off the $3.1 million in
mortgage debt secured by such land parcels.

In April 1999, ART refinanced the matured mortgage debt secured by its Yorktown
land in the amount of $4.8 million, receiving net cash of $580,000 after paying
off $4.0 million in mortgage debt and the payment of various closing costs.

At March 31, 1999, the mortgage debt secured by ART's McKinney I, II, III, IV, V
and Dowdy land in the amount of $15.2 million matured.  ART and the lender
reached an agreement to extend the mortgage's maturity to September 1999, in
exchange for, among other things, ART's payment of an extension fee.

In May 1999, the Partnership obtained mortgage financing secured by the
unencumbered 257 unit Pines Apartments in Little Rock, Arkansas, and by a $5.0
million note receivable secured by second liens on two parcels of land in Denton
County and Tarrant County, Texas in the amount of $4.0 million.  The Partnership
received net cash of $3.9 million after the payment of various closing costs.

Also in May 1999, the Las Colinas I term loan lender provided additional
financing secured by ART's Plano Parkway land parcel in the amount of $2.0
million.  The proceeds from this financing along with an additional $831,000 in
cash were used to payoff the remaining $2.7 million in mortgage debt secured by
such land parcel and the payment of various closing costs.

In June 1999, the Partnership obtained mortgage financing secured by the
unencumbered 100 unit Stonebridge Apartments in Florissant, Missouri, in the
amount of $3.0 million.  The Partnership received net cash of $2.9 million after
the payment of various closing costs.

In July 1999, the Partnership obtained mortgage financing secured by the
unencumbered 76 unit Bridgestone Apartments in Friendswood, Texas, in the amount
of $2.1 million.  The Partnership received net cash of $2.0 million after the
payment of various closing costs.

Equity Investments. During the fourth quarter of 1988, ART began purchasing
shares of REITs that have the same advisor as the Company. It is anticipated
that additional equity securities of the REITs will be acquired in the future
through open-market and negotiated transactions to the extent that ART's
liquidity permits.

                                       31
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Liquidity and Capital Resources (Continued)

Equity securities of the REITs and NRLP held by the Company may be deemed to be
"restricted securities" under Rule 144 of the Securities Act of 1933
("Securities Act").  Accordingly, the Company may be unable to sell such equity
securities other than in a registered public offering or pursuant to an
exemption under the Securities Act for a one-year period after they are
acquired.  Such  restrictions may reduce the Company's ability to realize the
full fair market value of such investments if it attempted to dispose of such
securities in a short period of time.

The Company's cash flow from its REIT investments is dependent on the ability of
each of the entities to make distributions.  The Company received distributions
totaling $849,000 in the six months ended June 30, 1999, from the REITs.

The Company has margin arrangements with various brokerage firms which provide
for borrowing up to 50% of the market value of the Company's marketable equity
securities.  The borrowings under such margin arrangements are secured by equity
securities of the REITs, NRLP and the Company's trading portfolio and bear
interest rates ranging from 7.0% to 11.0%.  Margin borrowing totaled $35.6
million at June 30, 1999.

ART expects that it will be necessary for it to sell $66.5 million, $48.0
million and $17.0 million of its land holdings during each of the next three
years to satisfy the debt on such land as it matures.  If ART is unable to sell
at least the minimum amount of land to satisfy the debt obligations on such land
as it matures, or, if it was not able to extend such debt, would either sell
other of its assets to pay such debt or return the property to the lender.

Management reviews the carrying values of the Company's properties and mortgage
note receivables at least annually and whenever events or a change in
circumstances indicate that impairment may exist.  Impairment is considered to
exist if, in the case of a property, the future cash flow from the property
(undiscounted and without interest) is less than the carrying amount of the
property.  For notes receivable impairment is considered to exist if it is
probable that all amounts due under the terms of the note will not be collected.
In those instances  where impairment is found to exist, a provision for loss is
recorded by a charge against earnings.  The Company's mortgage note receivable
review includes an evaluation of the collateral property securing such note.
The property review generally includes selective property inspections, a review
of the property's current rents compared to market rents, a review of the
property's expenses, a review of maintenance requirements, a review of the
property's cash flow, discussions with the manager of the property and a review
of properties in the surrounding area.


Commitments and Contingencies

In 1996, ART was admitted to the Valley Ranch, L.P. partnership as general
partner and Class B Limited Partner.  The existing general and limited partners
converted their general and limited partner interest into

                                       32
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Commitments and Contingencies (Continued)

8,000,000 Class A units.  In March 1999, ART purchased the 100,000 Class A units
for $100,000.  ART subsequently reached agreement with the Class A unitholder to
acquire the remaining 7,900,000 Class A units for $1.00 per unit.  In April
1999, 900,000 units were purchased and 1.0 million units were purchased in July
1999 and 1.0 million units will be purchased in October 1999 and January 2000
and 2.0 million units in May 2001 and May 2002.


Results of Operations

For the three and six months ended June 30, 1999, the Company reported net
income of $949,000 and a loss of $8.2 million, compared to net income of $14.8
million and $5.7 million for the three and six months ended June 30, 1998.  The
primary factors contributing to the Company's results are discussed in the
following paragraphs.

Pizza parlor sales and cost of sales were $7.8 million and $6.6 million,
respectively, for the three months ended June 30, 1999 compared to $7.3 million
and $6.2 million in 1998.  Sales and cost of sales were $15.0 million and $12.8
million for the six months ended June 30, 1999, compared to $14.1 million and
$12.0 million in 1998.  The increased sales were primarily attributable to the
effects of a more aggressive marketing and advertising strategy, offset by an
increase in cost of sales attributable to record high cheese prices in January
1999.  Cheese prices returned to more historic levels in February 1999, but
began escalating again late in the second quarter of 1999.

Rents increased to $41.6 million and $81.9 million in the three and six months
ended June 30, 1999, from $15.7 million and $27.3 million in 1998. Rents from
commercial properties increased to $14.2 million for six months ended June 30,
1999, from $8.0 million in 1998.  Rent from hotels of $15.7 million in the six
months ended June 30, 1999 approximated the $15.4 million in 1998.  Rent from
apartments increased to $50.7 million in the six months ended June 30, 1999,
compared to $3.5 million in 1998.  The increase in commercial property rents was
primarily attributable to the consolidation of the Partnership's operations
effective January 1, 1999 and the increase in apartment rent was due to the 36
apartments acquired by ART in 1998 and the consolidation of the Partnership's
operations effective January 1, 1999.  Rental income is expected to increase
significantly in 1999 as a result of the  consolidation of the Partnership's
operations.  See NOTE 2. "SYNTEK ASSET MANAGEMENT, L.P."

Property operations expense increased to $25.5 million and $53.4 million in the
three and six months ended June 30, 1999 from $11.5 million and $21.2 million in
1998. Property operations expense for commercial properties increased to $7.5
million in the six months ended June 30, 1999 from $4.9 million in 1998. Hotel
property operations expense of $11.0 million in the six months ended June 30,
1999 approximated the $11.6 million in 1998. Land property operations expense
increased to $5.2 million in the six months ended June 30, 1999 from $1.8
million in 1998. Apartments property operations expense increased to $29.8
million in the

                                       33
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Results of Operations (Continued)

six months ended June 30, 1999 from $3.0 million in 1998.  The increase in
commercial property operations expense was primarily due to the consolidation of
the Partnership's operations effective January 1, 1999. The increase for land
was primarily due to the 16 land parcels acquired in 1998.  The increase for
apartments was due to the 36 apartments acquired in 1998 and the consolidation
of the Partnership's operations effective January 1, 1999.  Property operations
expense is expected to increase significantly in the remainder of 1999 as a
result of the consolidation of the Partnership's operations.

Interest income from mortgage notes receivable increased to $1.8 million and
$3.7 million in the three and six months ended June 30, 1999 from $16,000 and
$154,000 in 1998.  The increase is attributable to loans funded by the
Partnership in 1998.  Interest income is expected to increase significantly in
the remainder of 1999 as a result of the consolidation of the Partnership's
operations.

Other income was income of $670,000 in the three months ended June 30, 1999 and
a loss of $1.0 million in the six months ended June 30, 1999 compared to losses
of $399,000 and $608,000 in 1998.  An unrealized decrease in market value of
trading portfolio securities of $60,000 and $1.9 million was recognized in the
three and six months ended June 30, 1999 compared to $970,000 and $1.4 million
in 1998.  See NOTE 6. "MARKETABLE EQUITY SECURITIES - TRADING PORTFOLIO."

Interest expense increased to $24.4 million and $45.5 million in the three and
six months ended June 30, 1999, from $13.0 million and $22.5 million in 1998.
Of the increase, $7.0 million and $13.8 million was attributable to the
consolidation of the Partnership's operations effective January 1, 1999, $3.1
million and $4.8 million was due to 16 parcels of land acquired in 1998, $2.1
million was due to the four land parcels acquired in 1999 and for the six months
ended June 30, 1999 $798,000 was due to the 36 apartments acquired in 1998.  In
the remainder of 1999, interest expense is expected to continue to rise due to a
full year of operations from the 36 apartments acquired in 1998 and the
consolidation of the Partnership's operations.

Depreciation expense increased to $4.5 million and $9.0 million in the three and
six months ended June 30, 1999, from $1.7 million and $3.0 million in 1998.  The
increases were attributable to the consolidation of the Partnership's operations
effective January 1, 1999, and the acquisition of 36 apartments in 1998.  See
NOTE 2. "SYNTEK ASSET MANAGEMENT, L.P."

Advisory fees increased to $1.4 million and $2.5 million in the three and six
months ended June 30, 1999, from $949,000 and $1.7 million in 1998. The
increases were attributable to an increase in ART's gross assets, the basis for
such fee. Such fee is expected to increase as ART's gross assets increase.

                                       34
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Results of Operations (Continued)

General and administrative expenses increased to $4.8 million and $8.9 million
in the three and six months ended June 30, 1999, from $1.9 million and $4.2
million in 1998.  The increases were primarily attributable to the consolidation
of the Partnership's operations effective January 1, 1999.

In the three and six months ended June 30, 1999, a provision for loss of $2.0
million was recognized.  Such loss relates to the June 1999, relinquishment by
ART of its general and Class B limited partner interests in a controlled
partnership that owned two apartments in Indianapolis, Indiana.  There was no
provision for loss in 1998.  See NOTE 4. "REAL ESTATE."

Minority interest increased to $6.9 million and $15.4 million in the three and
six months ended June 30, 1999 from $445,000 and $933,000 in 1998. The increase
was attributable to the consolidation of the Partnership. See NOTE 2. "SYNTEK
ASSET MANAGEMENT, L.P."

Equity in income of investees decreased to $4.1 million and $3.4 million in the
three and six months ended June 30, 1999 from $19.0 million and $21.3 million in
1998.  The decreases in equity income were attributable to the consolidation of
the Partnership and the lack of gains from the sale of real estate in the REITs.
See NOTE 2. "SYNTEK ASSET MANAGEMENT, L.P."

In the six months ended June 30, 1999, gains on sale of real estate of $38.7
million were recognized.  In January 1999, GCLP recognized a $2.2 million gain
on the sale of the Olde Towne Apartments.  In February 1999, the Company
recognized a gain on the sale of:  (1) a 4.6 acre tract of its Plano Parkway
land; (2) the Santa Fe Apartments; and, (3) the Mesa Ridge Apartments, totaling
$11.4 million.  In March 1999, ART recognized gains on the sale of:  (1) a 9.9
acre tract of its Mason/Goodrich land; (2) two tracts of its McKinney II and
McKinney IV land totaling 33.7 acres; and (3) a 13.0 acre tract of its Rasor
land, totaling $4.3 million.  In April 1999, the Partnership recognized a $1.8
million gain on the sale of the Horizon East Apartments and a $2.3 million gain
on the sale of the Lantern Ridge Apartments.  In May 1999, ART recognized a
$913,000 gain on the sale of a 15.0 acre tract of its Vista Ridge land and a
$1.1 million gain on the sale of two tracts totaling 24.5 acres of its Plano
Parkway land.  In June 1999, ART recognized gains on the sale of:  (1) two
tracts totaling 77.6 acres of its Frisco Bridges land; (2) 6.6 acres of its
Plano Parkway land; (3) the Continental Hotel; and, (4) the Barcelona
Apartments, totaling $14.9 million.

For the three and six months ended June 30, 1998, the Company recognized gains
on the sale of real estate totaling $9.0 million from:  (1) 21.3 acres of
Parkfield land; (2) Lewisville land; (3) 21.2 acres of Chase Oaks land; (4)
150.0 acres of Rasor land; (5) Palm Desert land; and (6) 39.4 acres of Valley
Ranch land.

                                       35
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Environmental Matters

Under various federal, state and local environmental laws, ordinances and
regulations, the Company may be potentially liable for removal or remediation
costs, as well as certain other potential costs relating to hazardous or toxic
substances (including governmental fines and injuries to persons and property)
where property-level managers have arranged for the removal, disposal or
treatment of hazardous or toxic substances.  In addition, certain environmental
laws impose liability for release of asbestos-containing materials into the air
and third parties may seek recovery from the Company for personal injury
associated with such materials.

Management is not aware of any environmental liability relating to the above
matters that would have a material adverse effect on the Company's business,
assets or results of operations.


Inflation

The effects of inflation on the Company's operations are not quantifiable.
Revenues from property operations fluctuate proportionately with inflationary
increases and decreases in housing costs.  Fluctuations in the rate of inflation
also affect the sales values of properties and, correspondingly, the ultimate
gains to be realized by the Company from property sales.


Year 2000

BCM has informed management that its computer hardware operating system and
computer software have been certified as year 2000 compliant.

Carmel Realty Services, Ltd. ("Carmel, Ltd."), an affiliate of BCM that performs
property management services for the Company's properties, has informed
management that effective January 1, 1999, it began using year 2000 compliant
computer hardware and property management software for ART's commercial
properties.  With regard to the Company's apartments, Carmel, Ltd. has informed
management that its subcontractors are also using year 2000 compliant computer
hardware and property management software.

The Company has not incurred nor does it expect to incur any costs related to
its computer hardware and accounting and property management computer software
being modified, upgraded or replaced to make it year 2000 compliant.  Such costs
have been or will be borne by either BCM, Carmel, Ltd. or the property
management subcontractors of Carmel, Ltd.

Management has completed its evaluation of the Company's computer controlled
building systems, such as security, elevators, heating and cooling, etc. to
determine what systems are not year 2000 compliant. Management believes that
necessary modifications are insignificant and do not require significant
expenditures to make the affected systems year 2000 compliant, as enhanced
operating systems are readily available.

                                       36
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS (Continued)


Year 2000 (Continued)

The Company has or will have in place the year 2000 compliant systems that will
allow it to operate.  The risks the Company faces are that certain of its
vendors will not be able to supply goods or services and that financial
institutions and taxing authorities will not be able to accurately apply
payments made to them.  Management believes that other vendors are readily
available and that financial institutions and taxing authorities will, if
necessary, apply monies received manually.  The likelihood of the above having a
significant impact on the Company's operations is negligible.


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


                          PART II.  OTHER INFORMATION


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits: The following exhibits are filed herewith or incorporated by
     reference as indicated below.

Exhibit
Number                                   Description
-------   ----------------------------------------------------------------------

 27.0     Financial Data Schedule, filed herewith.


(b)  Reports on Form 8-K as follows:

     None.

                                       37
<PAGE>

                                SIGNATURE PAGE


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                    AMERICAN REALTY TRUST, INC.



Date:     August 16, 1999        By:  /s/ Karl L. Blaha
     -------------------------      -----------------------------------
                                    Karl L. Blaha
                                    President



Date:     August 16, 1999        By:  /s/ Thomas A. Holland
     -------------------------      -----------------------------------
                                    Thomas A. Holland
                                    Executive Vice President and
                                    Chief Financial Officer
                                    (Principal Financial and
                                     Accounting Officer)

                                       38
<PAGE>

                          AMERICAN REALTY TRUST, INC.

                                  EXHIBITS TO

                         QUARTERLY REPORT ON FORM 10-Q

                    For the Six Months Ended June 30, 1999



Exhibit                                                                   Page
Number    Description                                                    Number
-------   ------------------------------------------------------------   ------

 27.0     Financial Data Schedule                                           40

                                       39