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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2022

OR

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

For the transition period from                      to                     

Commission file number 001-11350

CTO REALTY GROWTH, INC.

(Exact name of registrant as specified in its charter)

Maryland

    

59-0483700

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1140 N. Williamson Blvd., Suite 140

Daytona Beach, Florida

32114

(Address of principal executive offices)

(Zip Code)

(386) 274-2202

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbols

    

Name of each exchange on which registered:

Common Stock, $0.01 par value per share

CTO

NYSE

6.375% Series A Cumulative Redeemable

Preferred Stock, $0.01 par value per share

CTO PrA

NYSE

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

  

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).    Yes      No  

As of July 21, 2022, there were 18,317,378 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

Table of Contents

INDEX

Page

    

No.

PART I—FINANCIAL INFORMATION

Item 1.      Financial Statements

Consolidated Balance Sheets – June 30, 2022 (Unaudited) and December 31, 2021

3

Consolidated Statements of Operations – Three and six months ended June 30, 2022 and 2021 (Unaudited)

4

Consolidated Statements of Comprehensive Income – Three and six months ended June 30, 2022 and 2021 (Unaudited)

5

Consolidated Statements of Stockholders’ Equity – Three and six months ended June 30, 2022 and 2021 (Unaudited)

6

Consolidated Statements of Cash Flows – Six months ended June 30, 2022 and 2021 (Unaudited)

8

Notes to Consolidated Financial Statements (Unaudited)

10

Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations

39

Item 3.      Quantitative and Qualitative Disclosures About Market Risk

50

Item 4.      Controls and Procedures

51

PART II—OTHER INFORMATION

51

Item 1.      Legal Proceedings

51

Item 1A.   Risk Factors

51

Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds

52

Item 3.      Defaults Upon Senior Securities

52

Item 4.      Mine Safety Disclosures

52

Item 5.      Other Information

52

Item 6.      Exhibits

53

SIGNATURES

54

2

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CTO REALTY GROWTH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

As of

    

(Unaudited)
June 30, 2022

    

December 31,
2021

ASSETS

Real Estate:

Land, at Cost

$

205,245

$

189,589

Building and Improvements, at Cost

344,205

325,418

Other Furnishings and Equipment, at Cost

741

707

Construction in Process, at Cost

10,419

3,150

Total Real Estate, at Cost

560,610

518,864

Less, Accumulated Depreciation

(31,735)

(24,169)

Real Estate—Net

528,875

494,695

Land and Development Costs

686

692

Intangible Lease Assets—Net

78,328

79,492

Assets Held for Sale—See Note 24

6,720

Investment in Alpine Income Property Trust, Inc.

38,483

41,037

Mitigation Credits

3,436

3,702

Mitigation Credit Rights

21,018

21,018

Commercial Loans and Investments

68,783

39,095

Cash and Cash Equivalents

7,137

8,615

Restricted Cash

27,189

22,734

Refundable Income Taxes

286

442

Deferred Income Taxes—Net

105

Other Assets—See Note 12

28,029

14,897

Total Assets

$

802,355

$

733,139

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Accounts Payable

$

1,325

$

676

Accrued and Other Liabilities—See Note 18

15,705

13,121

Deferred Revenue—See Note 19

5,358

4,505

Intangible Lease Liabilities—Net

5,277

5,601

Deferred Income Taxes—Net

483

Long-Term Debt

343,196

278,273

Total Liabilities

370,861

302,659

Commitments and Contingencies—See Note 22

Stockholders’ Equity:

Preferred Stock – 100,000,000 shares authorized; $0.01 par value, 6.375% Series A Cumulative Redeemable Preferred Stock, $25.00 Per Share Liquidation Preference, 3,000,000 shares issued and outstanding at June 30, 2022 and December 31, 2021

30

30

Common Stock – 500,000,000 shares authorized; $0.01 par value, 6,082,626 shares issued and outstanding at June 30, 2022 and 5,916,226 shares issued and outstanding at December 31, 2021

61

60

Additional Paid-In Capital

86,347

85,414

Retained Earnings

332,916

343,459

Accumulated Other Comprehensive Income

12,140

1,517

Total Stockholders’ Equity

431,494

430,480

Total Liabilities and Stockholders’ Equity

$

802,355

$

733,139

The accompanying notes are an integral part of these consolidated financial statements.

3

Table of Contents

CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except share and per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

    

2022

    

2021

    

2022

    

2021

Revenues

Income Properties

$

16,367

$

11,574

$

31,535

$

23,023

Management Fee Income

948

752

1,884

1,421

Interest Income From Commercial Loans and Investments

1,290

709

2,008

1,410

Real Estate Operations

858

1,248

1,246

3,141

Total Revenues

19,463

14,283

36,673

28,995

Direct Cost of Revenues

Income Properties

(4,812)

(2,787)

(8,828)

(5,704)

Real Estate Operations

(228)

(533)

(279)

(615)

Total Direct Cost of Revenues

(5,040)

(3,320)

(9,107)

(6,319)

General and Administrative Expenses

(2,676)

(2,665)

(5,719)

(5,797)

Impairment Charges

(16,527)

(16,527)

Depreciation and Amortization

(6,727)

(5,031)

(13,096)

(9,861)

Total Operating Expenses

(14,443)

(27,543)

(27,922)

(38,504)

Gain (Loss) on Disposition of Assets

4,732

(245)

5,440

Gain (Loss) on Extinguishment of Debt

(641)

(641)

Other Gains and Income (Loss)

4,091

(245)

4,799

Total Operating Income (Loss)

5,020

(9,169)

8,506

(4,710)

Investment and Other Income (Loss)

(1,311)

3,903

(3,205)

9,235

Interest Expense

(2,277)

(2,421)

(4,179)

(4,865)

Income (Loss) Before Income Tax Benefit (Expense)

1,432

(7,687)

1,122

(340)

Income Tax Benefit (Expense)

(214)

3,963

298

4,401

Net Income (Loss) Attributable to the Company

1,218

(3,724)

1,420

4,061

Distributions to Preferred Stockholders

(1,196)

(2,391)

Net Income (Loss) Attributable to Common Stockholders

$

22

$

(3,724)

$

(971)

$

4,061

Per Share Information—See Note 14:

Basic and Diluted Net Income (Loss) Attributable to Common Stockholders

$

0.00

$

(0.63)

$

(0.16)

$

0.69

Weighted Average Number of Common Shares

Basic and Diluted

6,004,178

5,898,280

5,956,798

5,888,735

The accompanying notes are an integral part of these consolidated financial statements.

4

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CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in thousands)

Three Months Ended

Six Months Ended

June 30, 2022

    

June 30, 2021

    

June 30, 2022

    

June 30, 2021

Net Income (Loss) Attributable to the Company

$

1,218

$

(3,724)

$

1,420

$

4,061

Other Comprehensive Income (Loss):

Cash Flow Hedging Derivative - Interest Rate Swaps

2,611

(67)

10,623

1,170

Total Other Comprehensive Income (Loss)

2,611

(67)

10,623

1,170

Total Comprehensive Income (Loss)

$

3,829

$

(3,791)

$

12,043

$

5,231

The accompanying notes are an integral part of these consolidated financial statements.

5

Table of Contents

CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)

For the three months ended June 30, 2022:

Preferred Stock

Common Stock

Treasury Stock

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Income

Stockholders' Equity

Balance April 1, 2022

$

30

$

60

$

$

81,092

$

339,828

$

9,529

$

430,539

Net Income Attributable to the Company

1,218

1,218

Stock Repurchase

(1,147)

(1,147)

Exercise of Stock Options and Stock Issuance to Directors

88

88

Stock Issuance, Net of Equity Issuance Costs

1

5,689

5,690

Stock-Based Compensation Expense

625

625

Preferred Stock Dividends Declared for the Period

(1,196)

(1,196)

Common Stock Dividends Declared for the Period

(6,934)

(6,934)

Other Comprehensive Income

2,611

2,611

Balance June 30, 2022

$

30

$

61

$

$

86,347

$

332,916

$

12,140

$

431,494

For the three months ended June 30, 2021:

Preferred Stock

Common Stock

Treasury Stock

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Stockholders' Equity

Balance April 1, 2021

$

$

60

$

$

13,341

$

341,645

$

(673)

$

354,373

Net Loss Attributable to the Company

(3,724)

(3,724)

Exercise of Stock Options and Stock Issuance to Directors

80

80

Stock-Based Compensation Expense

667

667

Equity Issuance Costs

(412)

(412)

Common Stock Dividends Declared for the Period

(6,026)

(6,026)

Other Comprehensive Loss

(67)

(67)

Balance June 30, 2021

$

$

60

$

$

13,676

$

331,895

$

(740)

$

344,891

6

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CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(Unaudited, in thousands)

For the six months ended June 30, 2022:

Preferred Stock

Common Stock

Treasury Stock

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Income

Stockholders' Equity

Balance January 1, 2022

$

30

$

60

$

$

85,414

$

343,459

$

1,517

$

430,480

Net Income Attributable to the Company

1,420

1,420

Adjustment to Equity Component of Convertible Debt Upon Adoption of ASU 2020-06

(7,034)

4,022

(3,012)

Stock Repurchase

(1,147)

(1,147)

Vested Restricted Stock and Performance Shares

(845)

(845)

Exercise of Stock Options and Stock Issuance to Directors

237

237

Stock Issuance, Net of Equity Issuance Costs

1

8,478

8,479

Stock-Based Compensation Expense

1,244

1,244

Preferred Stock Dividends Declared for the Period

(2,391)

(2,391)

Common Stock Dividends Declared for the Period

(13,594)

(13,594)

Other Comprehensive Income

10,623

10,623

Balance June 30, 2022

$

30

$

61

$

$

86,347

$

332,916

$

12,140

$

431,494

For the six months ended June 30, 2021:

Preferred Stock

Common Stock

Treasury Stock

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Income (Loss)

Stockholders' Equity

Balance January 1, 2021

$

$

7,250

$

(77,541)

$

83,183

$

339,917

$

(1,910)

$

350,899

Net Income Attributable to the Company

4,061

4,061

Vested Restricted Stock and Performance Shares

(436)

(436)

Exercise of Stock Options and Common Stock Issuance

372

372

Equity Issuance Costs

(428)

(428)

Stock-Based Compensation Expense

1,336

1,336

Par Value $0.01 per Share and Treasury Stock Derecognized at January 29, 2021

(7,190)

77,541

(70,351)

Common Stock Dividends Declared for the Period

(12,083)

(12,083)

Other Comprehensive Income

1,170

1,170

Balance June 30, 2021

$

$

60

$

$

13,676

$

331,895

$

(740)

$

344,891

The accompanying notes are an integral part of these consolidated financial statements.

7

Table of Contents

CTO REALTY GROWTH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Six Months Ended

June 30, 2022

June 30, 2021

Cash Flow from Operating Activities:

Net Income Attributable to the Company

$

1,420

$

4,061

Adjustments to Reconcile Net Income Attributable to the Company to Net Cash Provided by Operating Activities:

Depreciation and Amortization

13,096

9,861

Amortization of Intangible Liabilities to Income Property Revenue

978

(734)

Amortization of Deferred Financing Costs to Interest Expense

337

324

Amortization of Discount on Convertible Debt

109

629

Loss (Gain) on Disposition of Assets

66

(5,440)

Loss on Disposition of Commercial Loans and Investments

179

Loss on Extinguishment of Debt

641

Impairment Charges

16,527

Accretion of Commercial Loans and Investments Origination Fees

(79)

(1)

Non-Cash Imputed Interest

(107)

(214)

Deferred Income Taxes

(589)

(3,994)

Unrealized (Gain) Loss on Investment Securities

4,348

(8,220)

Non-Cash Compensation

1,611

1,700

Decrease (Increase) in Assets:

Refundable Income Taxes

157

(573)

Land and Development Costs

6

399

Mitigation Credits and Mitigation Credit Rights

266

Other Assets

(2,802)

(636)

Increase in Liabilities:

Accounts Payable

650

287

Accrued and Other Liabilities

1,915

2,956

Deferred Revenue

852

717

Net Cash Provided By Operating Activities

22,413

18,290

Cash Flow from Investing Activities:

Acquisition of Real Estate and Intangible Lease Assets and Liabilities

(29,621)

(114,021)

Acquisition of Commercial Loans and Investments

(46,876)

(364)

Cash Contribution to Joint Ventures

(346)

Proceeds from Disposition of Property, Plant, and Equipment, Net, and Assets Held for Sale

6,754

34,261

Principal Payments Received on Commercial Loans and Investments

17,182

Acquisition of Investment Securities

(1,797)

Net Cash Used In Investing Activities

(54,358)

(80,470)

Cash Flow From Financing Activities:

Proceeds from Long-Term Debt

55,000

147,500

Payments on Long-Term Debt

(11,000)

(86,963)

Cash Paid for Loan Fees

(148)

(900)

Proceeds from (Cash Paid for) Exercise of Stock Options and Common Stock Issuance

172

(4)

Cash Used to Purchase Common Stock

(1,147)

Cash Paid for Vesting of Restricted Stock

(845)

(436)

Proceeds from (Cash Paid for) Issuance of Common Stock, Net

8,478

(428)

Dividends Paid - Preferred Stock

(2,391)